Model for correlations in stock markets

We propose a group model for correlations in stock markets. In the group mo del the markets are composed of several groups, within which the stock pric e fluctuations are correlated. The spectral properties of empirical correla tion matrices reported recently are well understood from the model. It prov ides the connection between the spectral properties of the empirical correl ation matrix and the structure of correlations in stock markets.