A Random Matrix Theory Based Analysis of Stocks of Markets from Different Countries

6 Pages Posted: 2 Oct 2007

See all articles by Ricardo Coehlo

Ricardo Coehlo

Trinity College Dublin - School of Business

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; University of Economics Ho Chi Minh City

Stefan Hutzler

Trinity College (Dublin) - School of Physics

Peter Richmond

Trinity College (Dublin) - Department of Physics

Date Written: October 2007

Abstract

Correlations of stocks in time have been widely studied. Both the Random Matrix Theory approach and the graphical visualisation of so-called Minimum Spanning Trees show the clustering of stocks according to industrial sectors. Studying the correlation between stocks traded in markets of different countries we show that the Random Matrix Theory approach is able to separate stocks according to their geographical location, provided they are not strongly correlated. These results are compared with the results from random time series created using the market model, where the main factor is the mean of returns of the stocks of each sector.

Keywords: Random Matrix, correlations, geographical, country

JEL Classification: C69, G15

Suggested Citation

Coehlo, Ricardo and Lucey, Brian M. and Hutzler, Stefan and Richmond, Peter, A Random Matrix Theory Based Analysis of Stocks of Markets from Different Countries (October 2007). Available at SSRN: https://ssrn.com/abstract=1018601 or http://dx.doi.org/10.2139/ssrn.1018601

Ricardo Coehlo

Trinity College Dublin - School of Business ( email )

2-3 College Green
Dublin, Leinster
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

University of Economics Ho Chi Minh City ( email )

59C Nguyen D├Čnh Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Stefan Hutzler

Trinity College (Dublin) - School of Physics ( email )

College Green
Dublin
Ireland

Peter Richmond

Trinity College (Dublin) - Department of Physics ( email )

2-3 College Green
Dublin, Leinster
Ireland

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