Phase transition in the S&P stock market
Authored by Friedrich Wagner, Matthias Raddant
Date Published: 2016
DOI: 10.1007/s11403-015-0160-x
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Abstract
We analyze the returns of stocks contained in the Standard \& Poor's 500
index from 1987 until 2011. We use covariance matrices of the firms'
returns determined in a time windows of several years. We find that the
eigenvector belonging to the leading eigenvalue (the market) exhibits a
phase transition. The market is in an ordered state from 1995 to 2005
and in a disordered state after 2005. We can relate this transition to
an order parameter derived from the stocks' beta and the trading volume.
This order parameter can also be interpreted within an agent-based
model.
Tags
noise
Risk
Model
Fluctuations
Financial-markets
Returns
Matrices