APPLICATION OF THE RANDOM MATRIX THEORY ON THE CROSS-CORRELATION OF STOCK ‎PRICES

Subject Areas : International Journal of Mathematical Modelling & Computations

F. Sotoude Vanoliya ¹ , A. Pourdarvish Heydari ²

1 - Department of Statistics, University of Mazandaran, Iran
2 - Department of Statistics, University of Mazandaran, Iran

Received: 2016-07-13 Accepted : 2016-07-13 Published : 2016-07-01

Keywords: random matrix theory, Cross-Correlation, Eigenvalue and eigenvector,

Abstract :

The analysis of cross-correlations is extensively applied for understanding of interconnections in stock markets. Variety of methods are used in order to search stock cross-correlations including the Random Matrix Theory (RMT), the Principal Component Analysis (PCA) and the Hierachical ‎Structures.‎ In ‎this work‎, we analyze cross-crrelations between price fluctuations of 20 ‎company ‎stocks‎‎ of Iran by using RMT. We find the eigenvalues and eigenvectors of the matrices of the cross-correlations related to ‎the‎se stocks.‎‎‎ The results show some eigenvalues do not fall within the bounds of RMT eigenvalues, that indicate the correlations of ‎‎ stocks in usual and critical flucatutions.