PRAT-ORTEGA, G. and SAVEL'EV, S., 2014. Stochastic GARCH dynamics describing correlations between stocks. Physica A - Statistical Mechanics and Its Applications, 410, pp. 623 - 627.
The ARCH and GARCH processes have been successfully used for modelling price dynamics such as stock returns or foreign exchange rates. Analysing the long range correlations between stocks, we propose a model, based on the GARCH process, which is able to describe the main characteristics of the stock price correlations, including the mean, variance, probability density distribution and the noise spectrum.
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The second author acknowledges support from the Leverhulme foundation.