Cross-correlation matrix analysis of Chinese and American bank stocks in subprime crisis

doi:10.1088/1674-1056/24/5/058903

Abstract In order to study the universality of the interactions among different markets, we analyze the cross-correlation matrix of the price of the Chinese and American bank stocks. We then find that the stock prices of the emerging market are more correlated than that of the developed market. Considering that the values of the components for the eigenvector may be positive or negative, we analyze the differences between two markets in combination with the endogenous and exogenous events which influence the financial markets. We find that the sparse pattern of components of eigenvectors out of the threshold value has no change in American bank stocks before and after the subprime crisis. However, it changes from sparse to dense for Chinese bank stocks. By using the threshold value to exclude the external factors, we simulate the interactions in financial markets.

Keywords: eigenvector stock price subprime crisis cross-correlation matrix

Received: 10 May 2014
Revised: 18 January 2015
Accepted manuscript online:

PACS:	89.65.Gh	(Economics; econophysics, financial markets, business and management)
	89.75.-k	(Complex systems)

Fund: Project supported by the National Natural Science Foundation of China (Grant Nos. 11275186, 91024026, and FOM2014OF001) and the University of Shanghai for Science and Technology (USST) of Humanities and Social Sciences, China (Grant Nos. USST13XSZ05 and 11YJA790231).

Corresponding Authors: Nie Sen, Wang Bing-Hong
E-mail: niesen@mail.ustc.edu.cn;bhwang@ustc.edu.cn

About author: 89.65.Gh; 89.75.-k

Cite this article:

Zhu Shi-Zhao (朱世钊), Li Xin-Li (李信利), Nie Sen (聂森), Zhang Wen-Qing (张文轻), Yu Gao-Feng (余高峰), Han Xiao-Pu (韩筱璞), Wang Bing-Hong (汪秉宏) Cross-correlation matrix analysis of Chinese and American bank stocks in subprime crisis 2015 Chin. Phys. B 24 058903

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Cross-correlation matrix analysis of Chinese and American bank stocks in subprime crisis

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