| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 978530 | Physica A: Statistical Mechanics and its Applications | 2006 | 5 Pages |
Abstract
We discuss a simple model of correlated assets capturing the feedback effects induced by portfolio investment in the covariance dynamics. This model predicts an instability when the volume of investment exceeds a critical value. Close to the critical point the model exhibits dynamical correlations very similar to those observed in real markets. Maximum likelihood estimates of the model's parameter for empirical data indeed confirms this conclusion. We show that this picture is confirmed by the empirical analysis for different choices of the time horizon.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
Matteo Marsili, Giacomo Raffaelli,