Journal
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volume 391, Issue 1-2, Pages 187-208Publisher
ELSEVIER
DOI: 10.1016/j.physa.2011.07.023
Keywords
Financial markets; Crisis; Correlation matrix; Random matrix theory
Categories
Funding
- Insper, Instituto de Ensino e Pesquisa
- CNPq
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Using the eigenvalues and eigenvectors of correlations matrices of some of the main financial market indices in the world, we show that high volatility of markets is directly linked with strong correlations between them. This means that markets tend to behave as one during great crashes. In order to do so, we investigate financial market crises that occurred in the years 1987 (Black Monday), 1998 (Russian crisis), 2001 (Burst of the dot-com bubble and September 11), and 2008 (Subprime Mortgage Crisis), which mark some of the largest downturns of financial markets in the last three decades. (C) 2011 Elsevier B.V. All rights reserved.
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