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Noise Dressing of Financial Correlation Matrices
| Content Provider | Semantic Scholar |
|---|---|
| Author | Laloux, Laurent Cizeau, Pierre Bouchaud, Jean-Philippe Potters, Marc |
| Copyright Year | 2004 |
| Abstract | We show that results from the theory of random matrices are potentially of great interest to understand the statistical structure of the empirical correlation matrices appearing in the study of price fluctuations. The central result of the present study is the remarkable agreement between the theoretical prediction (based on the assumption that the correlation matrix is random) and empirical data concerning the density of eigenvalues associated to the time series of the different stocks of the S&P500 (or other major markets). In particular the present study raises serious doubts on the blind use of empirical correlation matrices for risk management. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://web.mit.edu/18.325/www/rmt_finance2.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
