SERIAL CORRELATION, PERIODICITY AND SCALING OF EIGENMODES IN AN EMERGING MARKET

DOI10.1142/S0219024908005020zbMATH Open1185.91137arXivcond-mat/0404416MaRDI QIDQ3606402FDOQ3606402

Tim Gebbie, Diane Wilcox

Publication date: 26 February 2009

Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Abstract: We investigate serial correlation, periodic, aperiodic and scaling behaviour of eigenmodes, i.e. daily price fluctuation time-series derived from eigenvectors, of correlation matrices of shares listed on the Johannesburg Stock Exchange (JSE) from January 1993 to December 2002. Periodic, or calendar, components are detected by spectral analysis. We find that calendar effects are limited to eigenmodes which correspond to eigenvalues outside the Wishart range. Using a variance ratio test, we uncover serial correlation in the first eigenmodes and find slight negative serial correlation for eigenmodes within the Wishart range. Our spectral analysis and variance ratio investigations suggest that interpolating missing data or illiquid trading days with zero-order hold introduces high frequency noise and spurious serial correlation. Aperiodic and scaling behaviour of the eigenmodes are investigated by using rescaled-range (R/S) methods and detrended fluctuation analysis (DFA). We find that DFA and classic and modified R/S exponents suggest the presence of long-term memory effects in the first five eigenmodes.

Full work available at URL: https://arxiv.org/abs/cond-mat/0404416

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zbMATH Keywords

long memoryrandom matricesemerging marketsrandom walk hypothesis

Mathematics Subject Classification ID

Applications of statistics to actuarial sciences and financial mathematics (62P05) Economic time series analysis (91B84) Inference from stochastic processes and spectral analysis (62M15)

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Cited In (5)

• The emergence of temporal correlations in a study of global economic interdependence
• A comparison of generalized hyperbolic distribution models for equity returns
• SEARCH FOR LOG-PERIODIC OSCILLATIONS IN STOCK MARKET SIMULATIONS
• FINANCIAL AND OTHER SPATIO-TEMPORAL TIME SERIES: LONG-RANGE CORRELATIONS AND SPECTRAL PROPERTIES
• PERIODIC COMPONENTS AND CHARACTERISTIC TIME SCALES IN THE FINANCIAL MARKET

Uses Software

• longmemo

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