The recent global financial crisis has shown portfolio correlations between agents as one of the major channels of risk contagion and amplification. In this work, we analyse the structure and dynamics of the cross-correlation matrix of banks' loan portfolios in the yearly bank-firm credit...

The aim of this paper is to show that random matrix theory (RMT) can be a useful addition to the economist?s tool-kit in the analysis of macro-economic time series data. A great deal of applied economic work relies upon empirical estimates of the correlation matrix. However due to the finite...

The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic 'equally-weighted' portfolio. In this paper, we exploit clustering techniques derived from...

We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call ‘Principal Regression Analysis’ (PRA) and for which we provide some analytical (using Random Matrix...

Let (εj)j≥0 be a sequence of independent p-dimensional random vectors and τ≥1 a given integer. From a sample ε1,…,εT+τ of the sequence, the so-called lag-τ auto-covariance matrix is Cτ=T−1∑j=1Tετ+jεjt. When the dimension p is large compared to the sample size T, this paper...

In Jin et al. (2014), the limiting spectral distribution (LSD) of a symmetrized auto-cross covariance matrix is derived using matrix manipulation. The goal of this note is to provide a new method to derive the LSD, which greatly simplifies the derivation in Jin et al. (2014). Moreover, as a...

We analyzed the dependence structure of the credit and stock market using random matrix theory and network topology. The dynamics of both markets have been spotlighted throughout the subprime crisis. In this study, we compared these two markets in view of the market-wide effect from random...

We derive efficient recursive formulas giving the exact distribution of the largest eigenvalue for finite dimensional real Wishart matrices and for the Gaussian Orthogonal Ensemble (GOE). In comparing the exact distribution with the limiting distribution of large random matrices, we also found...