Topological structures in the equities market network

DOI10.1073/PNAS.0802806106MaRDI QIDQ3066178zbMATH OpenOpenAlexWikidataFDO

Authors Gregory Leibon, Scott D. Pauls, Daniel N. Rockmore, Robert Savell

Publication date 9 January 2011

Published in Proceedings of the National Academy of Sciences (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0805.3470

zbMATH Keywords

cluster analysiscomplex systemsDelaunay decompositiondimension reductionmultiscale

Mathematics Subject Classification ID

Social networks; opinion dynamics (91D30) Statistical methods; risk measures (91G70) Financial applications of other theories (91G80)

Abstract: We present a new method for articulating scale-dependent topological descriptions of the network structure inherent in many complex systems. The technique is based on "Partition Decoupled Null Models, a new class of null models that incorporate the interaction of clustered partitions into a random model and generalize the Gaussian ensemble. As an application we analyze a correlation matrix derived from four years of close prices of equities in the NYSE and NASDAQ. In this example we expose (1) a natural structure composed of two interacting partitions of the market that both agrees with and generalizes standard notions of scale (eg., sector and industry) and (2) structure in the first partition that is a topological manifestation of a well-known pattern of capital flow called "sector rotation. Our approach gives rise to a natural form of multiresolution analysis of the underlying time series that naturally decomposes the basic data in terms of the effects of the different scales at which it clusters. The equities market is a prototypical complex system and we expect that our approach will be of use in understanding a broad class of complex systems in which correlation structures are resident.

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Cites work

• A theory for multiresolution signal decomposition: the wavelet representation
• Institutional investors and equity prices
• Multiscale Representations for Manifold-Valued Data

Cited in

(10)

• Identification of information networks in stock markets
• scientific article; zbMATH DE number 6497102 (Why is no real title available?)
• Network topology of economic sectors
• STRUCTURALLY DYNAMIC SPIN MARKET NETWORKS
• Shareholding Networks and Centrality: An Application to the Italian Financial Market
• Network topology of the interbank market
• The structure analysis of NYSE market investment based on complex networks
• Introduction to correlation networks: interdisciplinary approaches beyond thresholding
• Network topology of an experimental futures exchange
• Correlation based networks of equity returns sampled at different time horizons

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