Correlations, Risk and Crisis: From Physiology to Finance

@article{Gorban2010CorrelationsRA,
  title={Correlations, Risk and Crisis: From Physiology to Finance},
  author={Alexander N. Gorban and Elena V. Smirnova and Tatiana A Tyukina},
  journal={Physica A-statistical Mechanics and Its Applications},
  year={2010},
  volume={389},
  pages={3193-3217}
}
We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before obvious symptoms of crisis appear, correlation increases, and, at the same time, variance (and volatility) increases too. This effect is supported by many experiments and observations of groups of humans, mice, trees, grassy plants, and on financial time series. A… Expand
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