Abstract
With the random matrix theory, we decompose the multi-dimensional time series of complex financial systems into a set of orthogonal eigenmode functions, which are classified into the market mode, sector mode, and random mode. In particular, the localized motion generated by the business sectors, plays an important role in financial systems. Both the business sectors and their impact on the stock market are identified from the localized motion. We clarify that the localized motion induces different characteristics of the time correlations for the stock-market index and individual stocks. With a variation of a two-factor model, we reproduce the return-volatility correlations of the eigenmodes.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
