Correlation filtering in financial time series

T. Aste; Tiziana Di Matteo; M. Tumminello; R. N. Mantegna

doi:10.1117/12.619185

23 May 2005 Correlation filtering in financial time series (Invited Paper)

T. Aste, Tiziana Di Matteo, M. Tumminello, R. N. Mantegna

Proceedings Volume 5848, Noise and Fluctuations in Econophysics and Finance; (2005) https://doi.org/10.1117/12.619185
Event: SPIE Third International Symposium on Fluctuations and Noise, 2005, Austin, Texas, United States

Abstract

We apply a method to filter relevant information from the correlation coefficient matrix by extracting a network of relevant interactions. This method succeeds to generate networks with the same hierarchical structure of the Minimum Spanning Tree but containing a larger amount of links resulting in a richer network topology allowing loops and cliques. In Tumminello et al.,1 we have shown that this method, applied to a financial portfolio of 100 stocks in the USA equity markets, is pretty efficient in filtering relevant information about the clustering of the system and its hierarchical structure both on the whole system and within each cluster. In particular, we have found that triangular loops and 4 element cliques have important and significant relations with the market structure and properties. Here we apply this filtering procedure to the analysis of correlation in two different kind of interest rate time series (16 Eurodollars and 34 US interest rates).

Citation Download Citation

T. Aste, Tiziana Di Matteo, M. Tumminello, and R. N. Mantegna "Correlation filtering in financial time series (Invited Paper)", Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); https://doi.org/10.1117/12.619185

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