The Empirical Study on the Correlation Among International Stock Markets Based on the Multi-scale Analysis

Wen-rong PAN, Jia-fu ZHAO, Shu-min PAN

Abstract


In this paper, it was the multi-scale analysis method that was used to decompose the stock index of international stock markets into a long - term trend signal and two short - term wave signals. Then, by the principal component analysis method, all of the stock markets were divided into several different categories. The study demonstrated that the developed countries and the emerging economics were divided into two different categories in the long term of trend. For the four days’ short-term fluctuations, the United States and Europe were the same category, while Asia-Pacific countries were divided into the another category. For the two days’ short-term fluctuations, all the stock markets are divided into three categories. European and American stock markets were classified into the same category. Besides, the Asia Pacific stock markets were divided into the same category except HK stock market and Shanghai stock market, which were another category. Finally, the article put forward that in order to reduce the investment risk, the investment capital should be dispersed into different categories of the stock markets

Keywords


Stock markets correlation, Wavelet analysis, Multi-scale analysis, Principal component analysis, Diversification of risk

Publication Date


2016-12-02 00:00:00


DOI
10.12783/dtem/iceme-ebm2016/4152

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