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Application of Random Matrix Theory for Financial Market Systems

Witte, Michael Jonathan
http://rave.ohiolink.edu/etdc/view?acc_num=bgsu1395675601

Abstract Details

2014, Master of Science (MS), Bowling Green State University, Physics.
The stock market plays a prominent role in the economy, used as both as an investment area to make wealth and as an overall indicator of its health. Thus, people have been trying to organize and predict the stock market and which stocks would be winners as seen by Peter Sander [1]. Research by Mantegna [2] and Onnela [3] showed that the market has a clear structure and could be represented as Minimal Spanning Trees. Qian [4] reported that the Hurst Exponent, a modeling method of correlation, could be applied to the study of financial markets. This study seeks to model these methods and utilizing Random Matrix Theory, determine whether these methods are valid and, if possible, applicable to a smaller subset of stocks. After review of the gathered data, it was found that while the Hurst Exponent and Minimal Spanning Trees do show structure, they cannot accurately predict future stock performance. In addition, there is no benefit to following a small group of stocks verse the market as a whole with the only exception being the index.
Haowen Xi, Dr. (Advisor)
Lewis Fulcher, Dr. (Committee Member)
74 p.
Economics; Physics
Hurst Exponent; Random Matrix Theory; Stock Market; Minimal Spanning Tree; Financial Systems

Recommended Citations

Citations

  • Witte, M. J. (2014). Application of Random Matrix Theory for Financial Market Systems [Master's thesis, Bowling Green State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=bgsu1395675601

    APA Style (7th edition)

  • Witte, Michael. Application of Random Matrix Theory for Financial Market Systems. 2014. Bowling Green State University, Master's thesis. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=bgsu1395675601.

    MLA Style (8th edition)

  • Witte, Michael. "Application of Random Matrix Theory for Financial Market Systems." Master's thesis, Bowling Green State University, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=bgsu1395675601

    Chicago Manual of Style (17th edition)

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This open access ETD is published by Bowling Green State University and OhioLINK.