A New Look on Financial Markets Co-Movement through Cooperative Dynamics in Many-Body Physics
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López García, María de las Nieves; Sánchez Granero, Miguel Ángel; Trinidad Segovia, Juan Evangelista; Puertas López, Antonio Manuel; Nieves López, Francisco Javier de lasFecha
2020-08-29Resumen
One of the main contributions of the Capital Assets Pricing Model (CAPM) to portfolio theory was to explain the correlation between assets through its relationship with the market index. According to this approach, the market index is expected to explain the co-movement between two different stocks to a great extent. In this paper, we try to verify this hypothesis using a sample of 3.000 stocks of the USA market (attending to liquidity, capitalization, and free float criteria) by using some functions inspired by cooperative dynamics in physical particle systems. We will show that all of the co-movement among the stocks is completely explained by the market, even without considering the market beta of the stocks.
Palabra/s clave
econophysics
collective motion
finance
stock market
capital assets pricing model