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arxiv: 1105.6272 · v1 · pith:5QMNFW5Unew · submitted 2011-05-31 · 💱 q-fin.GN · stat.AP

Life time of correlation between stocks prices on established and emerging markets

classification 💱 q-fin.GN stat.AP
keywords correlationmarketsstocksemergingestablishedhistorylifeprice
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The correlation coefficient between stocks depends on price history and includes information on hierarchical structure in financial markets. It is useful for portfolio selection and estimation of risk. I introduce the Life Time of Correlation between stocks prices to know how far we should investigate the price history to obtain the optimal durability of correlation. I carry out my research on emerging (Poland) and established markets (in the USA, Great Britain and Germany). Other methods, including the Minimum Spanning Trees, tree half-life, decomposition of correlations and the Epps effect are also discussed.

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