Exponential smoothing weighted correlations

被引:81
|
作者
Pozzi, F. [1 ]
Di Matteo, T. [1 ,2 ]
Aste, T. [1 ,3 ]
机构
[1] Australian Natl Univ, Dept Appl Math, Res Sch Phys Sci, Canberra, ACT 0200, Australia
[2] Kings Coll London, Dept Math, London WC2R 2LS, England
[3] Univ Kent, Sch Phys Sci, Canterbury CT2 7NH, Kent, England
来源
EUROPEAN PHYSICAL JOURNAL B | 2012年 / 85卷 / 06期
关键词
KENDALLS TAU; HISTORY; DETECT;
D O I
10.1140/epjb/e2012-20697-x
中图分类号
O469 [凝聚态物理学];
学科分类号
070205 ;
摘要
In many practical applications, correlation matrices might be affected by the "curse of dimensionality" and by an excessive sensitiveness to outliers and remote observations. These shortcomings can cause problems of statistical robustness especially accentuated when a system of dynamic correlations over a running window is concerned. These drawbacks can be partially mitigated by assigning a structure of weights to observational events. In this paper, we discuss Pearson's rho and Kendall's tau correlation matrices, weighted with an exponential smoothing, computed on moving windows using a data-set of daily returns for 300 NYSE highly capitalized companies in the period between 2001 and 2003. Criteria for jointly determining optimal weights together with the optimal length of the running window are proposed. We find that the exponential smoothing can provide more robust and reliable dynamic measures and we discuss that a careful choice of the parameters can reduce the autocorrelation of dynamic correlations whilst keeping significance and robustness of the measure. Weighted correlations are found to be smoother and recovering faster from market turbulence than their unweighted counterparts, helping also to discriminate more effectively genuine from spurious correlations.
引用
收藏
页数:21
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