CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS
The current Covid-19 crisis had a negative impact on the society and economy in general and on the capital markets in particular. Even if, at least in the first few months, the pandemics acted only as an exogenous shock upon the capital markets, its influence was clearly reflected in negative mark...
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| Format: | Article |
| Language: | English |
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Academica Brâncuşi
2020-12-01
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| Series: | Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie |
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| Online Access: | https://www.utgjiu.ro/revista/ec/pdf/2020-06/10_Ioan.pdf |
| _version_ | 1798018328353046528 |
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| author | IOAN ROXANA |
| author_facet | IOAN ROXANA |
| author_sort | IOAN ROXANA |
| collection | DOAJ |
| description | The current Covid-19 crisis had a negative impact on the society and economy in general and on the capital
markets in particular. Even if, at least in the first few months, the pandemics acted only as an exogenous shock upon
the capital markets, its influence was clearly reflected in negative market returns, even if the economic activity hadn’t
yet been affected by restrictions. Our paper aims to study the correlations structure evolution within the U.S. stock
market, from the 2019 “business as usual” times to the turbulent and volatile period of 2020. The methodology used in
our study involves in the first place a market efficiency analysis, based on an econo-physics approach, combining a
Hurst exponent and two fractal dimension estimators, meant to reveal any changes in the correlation structure of the
daily returns. The second part of our study conducts a Principal Component Analysis, in order to compare the number
of principal components able to explain a certain threshold of variation in 2020, in respect to 2019. The results confirm
the existence of increasing correlations within the market as the pandemics expanded, proving that imitation induced
by panic and ultimately herding appeared inside the market, as investors were affected by the imminence of the Covid19 disease on a psychological basis.
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| first_indexed | 2024-04-11T16:22:17Z |
| format | Article |
| id | doaj.art-7e7b1a66f12247af901fe5d5a9ecf1c9 |
| institution | Directory Open Access Journal |
| issn | 1844-7007 |
| language | English |
| last_indexed | 2024-04-11T16:22:17Z |
| publishDate | 2020-12-01 |
| publisher | Academica Brâncuşi |
| record_format | Article |
| series | Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie |
| spelling | doaj.art-7e7b1a66f12247af901fe5d5a9ecf1c92022-12-22T04:14:19ZengAcademica BrâncuşiAnalele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie1844-70072020-12-0166779CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISISIOAN ROXANA0WEST UNIVERSITY OF TIMISOARA, FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION, The current Covid-19 crisis had a negative impact on the society and economy in general and on the capital markets in particular. Even if, at least in the first few months, the pandemics acted only as an exogenous shock upon the capital markets, its influence was clearly reflected in negative market returns, even if the economic activity hadn’t yet been affected by restrictions. Our paper aims to study the correlations structure evolution within the U.S. stock market, from the 2019 “business as usual” times to the turbulent and volatile period of 2020. The methodology used in our study involves in the first place a market efficiency analysis, based on an econo-physics approach, combining a Hurst exponent and two fractal dimension estimators, meant to reveal any changes in the correlation structure of the daily returns. The second part of our study conducts a Principal Component Analysis, in order to compare the number of principal components able to explain a certain threshold of variation in 2020, in respect to 2019. The results confirm the existence of increasing correlations within the market as the pandemics expanded, proving that imitation induced by panic and ultimately herding appeared inside the market, as investors were affected by the imminence of the Covid19 disease on a psychological basis. https://www.utgjiu.ro/revista/ec/pdf/2020-06/10_Ioan.pdfcorrelations structuremarket efficiencyhurst exponentfractal dimensionprincipal component analysisherding behaviors |
| spellingShingle | IOAN ROXANA CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie correlations structure market efficiency hurst exponent fractal dimension principal component analysis herding behaviors |
| title | CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS |
| title_full | CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS |
| title_fullStr | CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS |
| title_full_unstemmed | CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS |
| title_short | CAPITAL MARKET CORRELATIONS STRUCTURE DURING THE COVID-19 CRISIS |
| title_sort | capital market correlations structure during the covid 19 crisis |
| topic | correlations structure market efficiency hurst exponent fractal dimension principal component analysis herding behaviors |
| url | https://www.utgjiu.ro/revista/ec/pdf/2020-06/10_Ioan.pdf |
| work_keys_str_mv | AT ioanroxana capitalmarketcorrelationsstructureduringthecovid19crisis |