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Journal of Economic Interaction and Coordination

, Volume 11, Issue 2, pp 229–246 | Cite as

Phase transition in the S&P stock market

  • Matthias Raddant
  • Friedrich Wagner
Regular Article

Abstract

We analyze the returns of stocks contained in the Standard & Poor’s 500 index from 1987 until 2011. We use covariance matrices of the firms’ returns determined in a time windows of several years. We find that the eigenvector belonging to the leading eigenvalue (the market) exhibits a phase transition. The market is in an ordered state from 1995 to 2005 and in a disordered state after 2005. We can relate this transition to an order parameter derived from the stocks’ beta and the trading volume. This order parameter can also be interpreted within an agent-based model.

Keywords

Stock price correlations CAPM S&P500 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Institute for the World EconomyKielGermany
  2. 2.Institut für VolkswirtschaftslehreUniversität KielKielGermany
  3. 3.Institut für Theoretische Physik und AstrophysikUniversität KielKielGermany

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