Summary
International Symposium on Nonlinear Theory and its Applications
2010
Session Number:B3L-B
Session:
Number:B3L-B2
A Complex Network Perspective to Volatility in Stock Markets
Xiao Fan Liu, Chi K. Tse,
pp.402-405
Publication Date:2010/9/5
Online ISSN:2188-5079
Summary:
In this paper we examine the interaction of stock markets of different countries by constructing networks that connect 32 selected stock market indices from different countries. In the network being constructed, the nodes are the stock market indices and the edges are connections between the indices. Each edge has an edge weight equal to the cross-correlation between the pair of connecting indices over a window of w days. We consider the period from 7 March 2005 to 23 April 2009, i.e., 1078 days with w < 1078. In this period, networks are constructed for all w-day windows at 1-day intervals. By examining the variation of the network parameters as time elapses, we show that the dynamics of network connectivity is related to the fluctuation of the stock markets. Specifically, a form of network synchronization is found to be correlated with the volatility of the stock markets. Our study thus reveals that the stock markets in different countries generally behave in a synchronous manner when the markets experience fluctuation.