The structural role of weak and strong links in a financial market network

DOI10.1140/EPJB/E2008-00237-3MaRDI QIDQ978665zbMATH OpenOpenAlexFDO

Authors Antonios Garas, Panos Argyrakis, Shlomo Havlin

Publication date 25 June 2010

Published in The European Physical Journal B. Condensed Matter and Complex Systems (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0805.2477

Mathematics Subject Classification ID

Social networks; opinion dynamics (91D30) Small world graphs, complex networks (graph-theoretic aspects) (05C82) Applications of statistical and quantum mechanics to economics (econophysics) (91B80)

Abstract: We investigate the properties of correlation based networks originating from economic complex systems, such as the network of stocks traded at the New York Stock Exchange (NYSE). The weaker links (low correlation) of the system are found to contribute to the overall connectivity of the network significantly more than the strong links (high correlation). We find that nodes connected through strong links form well defined communities. These communities are clustered together in more complex ways compared to the widely used classification according to the economic activity. We find that some companies, such as General Electric (GE), Coca Cola (KO), and others, can be involved in different communities. The communities are found to be quite stable over time. Similar results were obtained by investigating markets completely different in size and properties, such as the Athens Stock Exchange (ASE). The present method may be also useful for other networks generated through correlations.

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Cites work

• scientific article; zbMATH DE number 5004850 (Why is no real title available?)
• scientific article; zbMATH DE number 1866312 (Why is no real title available?)
• Collective dynamics of `small-world' networks
• Statistical mechanics of complex networks

Cited in

(11)

• Switching processes in financial markets
• STRUCTURALLY DYNAMIC SPIN MARKET NETWORKS
• Explosive percolation in the human protein homology network
• Resilience of networks formed of interdependent modular networks
• Analysis of weakly correlated nodes in market network
• Hierarchies in communities of UK stock market from the perspective of Brexit
• Dynamical clustering of exchange rates
• A \(k\)-shell decomposition method for weighted networks
• Disentangling bipartite and core-periphery structure in financial networks
• Analyzing the stock market based on the structure of \textit{kNN} network
• Markets as ecological networks: inferring interactions and identifying communities

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