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Comparing Tehran Stock Exchange As An Emerging Market With A Mature Market By Random Matrix Approach

Author

Listed:
  • A. NAMAKI

    (Department of Financial Management, Faculty of Management, University of Tehran, Tehran, Iran)

  • R. RAEI

    (Department of Financial Management, Faculty of Management, University of Tehran, Tehran, Iran)

  • G. R. JAFARI

    (Department of Physics, Shahid Beheshti University, G. C., Evin, Tehran 19839, Iran)

Abstract

We analyze cross-correlation between return fluctuations of stocks of an emerging market by using random matrix theory (RMT). We test the statistics of eigenvalues of cross-correlation(C)between stocks of the Tehran Price Index (TEPIX) as an emerging market and compare these with a mature market (US market). According to the "null hypothesis," a random correlation matrix constructed from mutually uncorrelated time series, the deviation from the Gaussian orthogonal ensemble of RTM is a good criterion. We find that a majority of the eigenvalues ofCfall within the bulk (RMT bounds betweenλ+andλ-) for the eigenvalues of the random correlation matrices. Further, we find that the distribution of eigenvector components for the eigenvectors corresponding to the largest deviating eigenvalues, display systematic deviations from the RMT prediction. Analyzing the components of the deviating eigenvectors by Inverse Participation Ratio, leads us to know that the largest eigenvalue corresponds to an influence common to the whole market. Our analysis of the other deviating eigenvectors shows distinct industries, whose identities corresponds to the structure of the Iran business environment.

Suggested Citation

  • A. Namaki & R. Raei & G. R. Jafari, 2011. "Comparing Tehran Stock Exchange As An Emerging Market With A Mature Market By Random Matrix Approach," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 371-383.
    • Handle: RePEc:wsi:ijmpcx:v:22:y:2011:i:04:n:s0129183111016300
    DOI: 10.1142/S0129183111016300
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    References listed on IDEAS

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    1. Mantegna,Rosario N. & Stanley,H. Eugene, 2007. "Introduction to Econophysics," Cambridge Books, Cambridge University Press, number 9780521039871, September.
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    Cited by:

    1. Hanie. Vahabi & Ali Namaki & Reza Raei, 2020. "Comparing the collective behavior of banking industry," Papers 2011.02026, arXiv.org.
    2. Manavi, Seyed Alireza & Jafari, Gholamreza & Rouhani, Shahin & Ausloos, Marcel, 2020. "Demythifying the belief in cryptocurrencies decentralized aspects. A study of cryptocurrencies time cross-correlations with common currencies, commodities and financial indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 556(C).
    3. Allahyari, N. & Hosseiny, A. & Abedpour, N. & Jafari, G.R., 2024. "Analyzing the heterogeneous structure of the genes interaction network through the random matrix theory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 641(C).
    4. Nguyen, Q. & Nguyen, N.K. K. & Nguyen, L.H. N., 2019. "Dynamic topology and allometric scaling behavior on the Vietnamese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 235-243.
    5. M. Saeedian & T. Jamali & M. Z. Kamali & H. Bayani & T. Yasseri & G. R. Jafari, 2017. "Emergence of world-stock-market network," Papers 1703.08781, arXiv.org.

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