Correlation of financial markets in times of crisis
By Leonidas Sandoval Junior, Ítalo de Paula Franca. 2011
302 citations recorded by the source corpus.
Using the eigenvalues and eigenvectors of correlations matrices of some of the main financial market indices in the world, we show that high volatility of markets is directly linked with strong correlations between them. This means that markets tend to behave as one during great crashes. In order to do so, we investigate financial market crises that occurred in the years 1987 (Black Monday), 1998 (Russian crisis), 2001 (Burst of the dot-com bubble and September 11), and 2008 (Subprime Mortgage Crisis), which mark some of the largest downturns of financial markets in the last three decades.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/c6ed04791578f11e05b9d7a3bd403368e1a24d0e
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In Economics and Econometrics
In Finance
Citations in the corpus
- Does the carbon market help or hurt the stock price of electricity companies? Further evidence from the European context (2016, background): “More recently, Sandoval Junior and Franca (Sandoval Junior & Franca, 2012) found this increased correlations among world stock indices for the number of crises which included GFC.”
- Random matrix theory analysis of cross-correlations in the US stock market: Evidence from Pearson’s correlation coefficient and detrended cross-correlation coefficient (2013, methodology): “[6], it has beenwidely used to study the statistical properties of cross-correlations in different financial markets [9–28], such as the Warsaw stock market [13,22], the South African stock market [15], the Istanbul stock market [16], the foreign exchange market [19], and the Indian stock market [20”