Dresden 2020 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 3: Financial Markets, Risk Management and Stochastic Processes

SOE 3.2: Talk

Monday, March 16, 2020, 11:30–11:45, GÖR 226

Revealing evolution of the correlation structure in financial markets — •Anton J. Heckens, Sebastian M. Krause, and Thomas Guhr — Universität Duisburg-Essen, Lotharstr. 1, 47048 Duisburg

Complex systems are characterized by a variety of interactions and often produce a strong correlated behavior of their system components. Financial markets are particularly well suited as examples of such complex systems due to their abundance of data for the analysis of correlated phenomena. The correlated price development of various stocks massively increases the financial risk of even broadly diversified financial operators. Financial markets are showing a strong non-stationarity, which must be taken into account in the analysis of correlations. Münnix et al. [1] use correlation matrices over short time horizons, in order to analyze their dynamics with respect to their non-stationarity. Using a cluster procedure, it became apparent that there are longer quasi-stationary periods that are corresponding to so-called market states. Crises break up these structures due to their strong collective behaviour and therefore cause non-stationary periods. Here we present new developments to improve the clustering method concerning the quasi-stationarity of the market states.

[1] M.C. Münnix, T. Shimada, R. Schäfer, F. Leyvraz, T.H. Seligman, T. Guhr and H.E. Stanley, Identifying States of a Financial Market, Scientific Reports 2 (2012) 644.