q-fin updates on arXiv.org
Tue, 22 Oct 2019 07:01:31 GMT language
We investigate 17 digital currencies making an analogy with quantum systems
and develop the concept of eigenportfolios. We show that the density of states
of the correlation matrix of these assets shows a behavior between that of the
Wishart ensemble and one whose elements are Cauchy distributed. A metric for
the participation matrix based on superposition of Gaussian functions is
proposed and we show that small eigenvalues correspond to localized states.
Nonetheless, some level of localization is also present for bigger eigenvalues
probably caused by the fat tails of the distribution of returns of these
assets. We also show through a clustering study that the digital currencies
tend to stagger together. We conclude the paper showing that this correlation
structure leads to an Epps effect.