SKM 2023 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 22: Financial Markets and Risk Management II

SOE 22.2: Talk

Friday, March 31, 2023, 10:15–10:30, ZEU 260

Collective Effects Relative to the Collective Market Motion in Financial Markets — •Anton J. Heckens and Thomas Guhr — Universität Duisburg-Essen, Lotharstr. 1, 47048 Duisburg

Financial markets are usually non-stationary and their dynamics is dominated by strong collective effects. We introduce new measures for collectivity derived from covariance and correlation matrices [1]. The largest eigenvalue of covariance and correlation matrices corresponds to the collective motion of the whole system. By removing the collective motion of the system as a whole, we detect a remaining collectivity which corresponds to the industrial sectors. We use risk-phase diagrams to compare the remaining collectivity with the market collectivity. The time evolution of the remaining collectivity shows a remarkable property as a potential precursor for the Lehman crash in 2008. As of 2015/2016 the collectivity in the US stock markets changed fundamentally. It is connected to trend shifts from smaller mean covariances or correlations to larger ones, especially in recent years. Hence, this new kind of collectivity is connected to systemic instabilities which appear more often in recent years according to our new measures.

[1] A. J. Heckens and T. Guhr, New Collectivity Measures for Financial Covariances and Correlations, Physica A: Statistical Mechanics and its Applications 604, 127704 (2022), arXiv:2202.00297.