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dc.contributor.authorPreis, Tobiasen_US
dc.contributor.authorKenett, Dror Y.en_US
dc.contributor.authorStanley, H. Eugeneen_US
dc.contributor.authorHelbing, Dirken_US
dc.contributor.authorBen-Jacob, Eshelen_US
dc.date.accessioned2020-04-03T15:20:58Z
dc.date.available2020-04-03T15:20:58Z
dc.date.issued2012-10-18
dc.identifierhttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000310448300001&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=6e74115fe3da270499c3d65c9b17d654
dc.identifier.citationTobias Preis, Dror Y. Kenett, H. Eugene Stanley, Dirk Helbing, Eshel Ben-Jacob. 2012. "Quantifying the Behavior of Stock Correlations Under Market Stress." SCIENTIFIC REPORTS, Volume 2. https://doi.org/10.1038/srep00752
dc.identifier.issn2045-2322
dc.identifier.urihttps://hdl.handle.net/2144/39963
dc.description.abstractUnderstanding correlations in complex systems is crucial in the face of turbulence, such as the ongoing financial crisis. However, in complex systems, such as financial systems, correlations are not constant but instead vary in time. Here we address the question of quantifying state-dependent correlations in stock markets. Reliable estimates of correlations are absolutely necessary to protect a portfolio. We analyze 72 years of daily closing prices of the 30 stocks forming the Dow Jones Industrial Average (DJIA). We find the striking result that the average correlation among these stocks scales linearly with market stress reflected by normalized DJIA index returns on various time scales. Consequently, the diversification effect which should protect a portfolio melts away in times of market losses, just when it would most urgently be needed. Our empirical analysis is consistent with the interesting possibility that one could anticipate diversification breakdowns, guiding the design of protected portfolios.en_US
dc.description.sponsorshipWe thank Dr. Helen Susannah Moat for comments. This work was partially supported by the German Research Foundation Grant PR 1305/1-1 (TP) and the National Science Foundation (HES) and by the CHIRP project Coping with Crises in Complex Socio-Economic Systems. Additional support comes from the Tauber family Foundation and the Maguy-Glass Chair in the Physics of Complex Systems at Tel Aviv University (DYK and EBJ). This work was also supported by the Intelligence Advanced Research Projects Activity (IARPA) via Department of Interior National Business Center (DoI/NBC) contract number D12PC00285. The U.S. Government is authorized to reproduce and distribute reprints for Governmental purposes notwithstanding any copyright annotation thereon. Disclaimer: The views and conclusions contained herein are those of the authors and should not be interpreted as necessarily representing the official policies or endorsements, either expressed or implied, of IARPA, DoI/NBC, or the U.S. Government. (PR 1305/1-1 - German Research Foundation; National Science Foundation; CHIRP project Coping with Crises in Complex Socio-Economic Systems; Tauber family Foundation; Maguy-Glass Chair in the Physics of Complex Systems at Tel Aviv University; D12PC00285 - Intelligence Advanced Research Projects Activity (IARPA) via Department of Interior National Business Center (DoI/NBC))en_US
dc.format.extent5 pagesen_US
dc.languageEnglish
dc.language.isoen_US
dc.publisherNature Publishing Groupen_US
dc.relation.ispartofScientific Reports
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-ShareALike 3.0 Unported License.en_US
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/3.0/
dc.subjectScience & technologyen_US
dc.subjectMultidisciplinary sciencesen_US
dc.subjectFinancial marketsen_US
dc.subjectStylized factsen_US
dc.subjectEconophysicsen_US
dc.subjectReturnsen_US
dc.subjectSystemsen_US
dc.subjectHumansen_US
dc.subjectInvestmentsen_US
dc.subjectModels, economicen_US
dc.subjectSystems analysisen_US
dc.subjectCorrelation breakdownen_US
dc.subjectPortfolio theoryen_US
dc.subjectStock marketen_US
dc.subjectDow Jones Industrial Averageen_US
dc.subjectState-dependent correlationsen_US
dc.subjectDiversificationen_US
dc.subjectStock market crashen_US
dc.subjectBiochemistry and cell biologyen_US
dc.subjectPhysical scienceen_US
dc.titleQuantifying the behavior of stock correlations under market stressen_US
dc.typeArticleen_US
dc.description.versionPublished versionen_US
dc.identifier.doi10.1038/srep00752
pubs.elements-sourceweb-of-scienceen_US
pubs.notesEmbargo: Not knownen_US
pubs.organisational-groupBoston Universityen_US
pubs.organisational-groupBoston University, College of Arts & Sciencesen_US
pubs.organisational-groupBoston University, College of Arts & Sciences, Department of Physicsen_US
pubs.publication-statusPublisheden_US
dc.identifier.mycv32269


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