A simple model for simulating cross correlations of a many-assets market is discussed. Correlations between assets are initially considered within the context of the well-known one-factor model, in which a driving term common to all stocks is present. The results are compared to those of real market data corresponding to a set of 445 stocks taken from the Standard and Poors 500 index. The model is further extended by introducing a stochastic volatility within each time series using an autoregressive scheme. This artifical market reproduces the empirically observed fat tails in the distribution function of logarithmic price variations and, more important, leads to additional cross correlations between the time series, in better agreement with the real market behavior. © 2006 The American Physical Society.

Roman, H., Albergante, M., Colombo, M., Croccolo, F., Marini, F., Riccardi, C. (2006). Modeling cross-correlations within a many-assets market. PHYSICAL REVIEW E, STATISTICAL, NONLINEAR, AND SOFT MATTER PHYSICS, 73, 036129.1-036129.8 [10.1103/PhysRevE.73.036129].

Modeling cross-correlations within a many-assets market

ROMAN, HECTOR EDUARDO;RICCARDI, CLAUDIA
2006

Abstract

A simple model for simulating cross correlations of a many-assets market is discussed. Correlations between assets are initially considered within the context of the well-known one-factor model, in which a driving term common to all stocks is present. The results are compared to those of real market data corresponding to a set of 445 stocks taken from the Standard and Poors 500 index. The model is further extended by introducing a stochastic volatility within each time series using an autoregressive scheme. This artifical market reproduces the empirically observed fat tails in the distribution function of logarithmic price variations and, more important, leads to additional cross correlations between the time series, in better agreement with the real market behavior. © 2006 The American Physical Society.
Articolo in rivista - Articolo scientifico
statistics; econophyiscs; correlations
English
2006
73
036129.1
036129.8
none
Roman, H., Albergante, M., Colombo, M., Croccolo, F., Marini, F., Riccardi, C. (2006). Modeling cross-correlations within a many-assets market. PHYSICAL REVIEW E, STATISTICAL, NONLINEAR, AND SOFT MATTER PHYSICS, 73, 036129.1-036129.8 [10.1103/PhysRevE.73.036129].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/465
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