Epochs in Market Sector Index Data — Empirical or Optimistic?
We introduce here the concept of “epochs’ in market movements (i.e. periods of co-movements of stocks). These periods in EURO-STOXX market sector data are characterised by linear relationships between price and eigenvalue change. The evidence suggests strong time dependence in the linear model coefficients but residuals are strongly dependent on granularity (i.e. sampling rate) with fit breaking down at rates smaller than five days. Possible reasons for this breakdown are presented together with additional arguments on the relative merits of correlation and variance-covariance matrix eigenanalyses in measuring co-movements of stocks.
KeywordsPrice Change Large Eigenvalue Daily Change High Sampling Rate Common Perception
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