### Abstract

Lingua originale | English |
---|---|

pagine (da-a) | 026104-1-026104-13 |

Numero di pagine | 13 |

Rivista | PHYSICAL REVIEW E, STATISTICAL, NONLINEAR, AND SOFT MATTER PHYSICS |

Volume | 76 |

Stato di pubblicazione | Published - 2007 |

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### All Science Journal Classification (ASJC) codes

- Statistical and Nonlinear Physics
- Statistics and Probability
- Condensed Matter Physics

### Cita questo

*PHYSICAL REVIEW E, STATISTICAL, NONLINEAR, AND SOFT MATTER PHYSICS*,

*76*, 026104-1-026104-13.

**Emergence of time-horizon invariant correlation structure in financial returns by subtraction of the market mode.** / Micciche', Salvatore; Marsili, Matteo; Borghesi, Christian.

Risultato della ricerca: Article

*PHYSICAL REVIEW E, STATISTICAL, NONLINEAR, AND SOFT MATTER PHYSICS*, vol. 76, pagg. 026104-1-026104-13.

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TY - JOUR

T1 - Emergence of time-horizon invariant correlation structure in financial returns by subtraction of the market mode.

AU - Micciche', Salvatore

AU - Marsili, Matteo

AU - Borghesi, Christian

PY - 2007

Y1 - 2007

N2 - We investigate the emergence of a structure in the correlation matrix of assets' returns as the time horizon over which returns are computed increases from the minutes to the daily scale. We analyze data from different stock markets (New York, Paris, London, Milano) and with different methods. In addition to the usual correlations, we also analyze those obtained by subtracting the dynamics of the "center of mass" (i.e., the market mode). We find that when the center of mass is not removed the structure emerges, as the time horizon increases, from splitting a single large cluster into smaller ones. By contrast, when the market mode is removed the structure of correlations observed at the daily scale is already well defined at very high frequency (5 min in the New York Stock Exchange). Moreover, this structure accounts for 80% of the classification of stocks in economic sectors. Similar results, though less sharp, are found for the other markets. We also find that the structure of correlations in the overnight returns is markedly different from that of intraday activity.

AB - We investigate the emergence of a structure in the correlation matrix of assets' returns as the time horizon over which returns are computed increases from the minutes to the daily scale. We analyze data from different stock markets (New York, Paris, London, Milano) and with different methods. In addition to the usual correlations, we also analyze those obtained by subtracting the dynamics of the "center of mass" (i.e., the market mode). We find that when the center of mass is not removed the structure emerges, as the time horizon increases, from splitting a single large cluster into smaller ones. By contrast, when the market mode is removed the structure of correlations observed at the daily scale is already well defined at very high frequency (5 min in the New York Stock Exchange). Moreover, this structure accounts for 80% of the classification of stocks in economic sectors. Similar results, though less sharp, are found for the other markets. We also find that the structure of correlations in the overnight returns is markedly different from that of intraday activity.

KW - NETWORKS

KW - SERIES

UR - http://hdl.handle.net/10447/32381

M3 - Article

VL - 76

SP - 026104-1-026104-13

JO - Physical Review E - Statistical, Nonlinear, and Soft Matter Physics

JF - Physical Review E - Statistical, Nonlinear, and Soft Matter Physics

SN - 1539-3755

ER -