Correlation of ﬁnancial markets in times of crisis
Using the eigenvalues and eigenvectors of correlations matrices of some of the main ﬁnancial market indices in the world, we show that high volatility of markets is directly linked with strong correlations between them. This means that markets tend to behave as one during great crashes. In order to do so, we investigate several ﬁnancial market crises that occurred in the years 1987 (Black Monday), 1989 (Russian crisis), 2001 (Burst of the dot-com bubble and September 11), and 2008 (Subprime Mortgage Crisis), which mark some of the largest downturns of ﬁnancial markets in the last three decades.
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