Nava, N;
Di Matteo, T;
Aste, T;
(2018)
Dynamic correlations at different time-scales with empirical mode decomposition.
Physica A: Statistical Mechanics and its Applications
, 502
pp. 534-544.
10.1016/j.physa.2018.02.108.
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Abstract
We introduce a simple approach which combines Empirical Mode Decomposition (EMD) and Pearson's cross-correlations over rolling windows to quantify dynamic dependency at different time scales. The EMD is a tool to separate time series into implicit components which oscillate at different time-scales. We apply this decomposition to intraday time series of the following three financial indices: the S & P 500 (USA), the IPC (Mexico) and the VIX (volatility index USA), obtaining time-varying multidimensional cross-correlations at different time-scales. The correlations computed over a rolling window are compared across the three indices, across the components at different time-scales and across different time lags. We uncover a rich heterogeneity of interactions, which depends on the time-scale and has important lead–lag relations that could have practical use for portfolio management, risk estimation and investment decisions.
| Type: | Article |
|---|---|
| Title: | Dynamic correlations at different time-scales with empirical mode decomposition |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.physa.2018.02.108 |
| Publisher version: | https://doi.org/10.1016/j.physa.2018.02.108 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Time-scale-dependent correlation, Time-dependent correlation, Empirical mode decomposition |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1572725 |
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