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arXiv:cond-mat/9802256cond-mat.stat-mech

Hierarchical Structure in Financial Markets

Rosario N. Mantegna

Early discovery. Linked by one identifiable commenter. This paper is outside the main ranking; a mention is not an endorsement.

Abstract

I find a topological arrangement of stocks traded in a financial market which has associated a meaningful economic taxonomy. The topological space is a graph connecting the stocks of the portfolio analyzed. The graph is obtained starting from the matrix of correlation coefficient computed between all pairs of stocks of the portfolio by considering the synchronous time evolution of the difference of the logarithm of daily stock price. The hierarchical tree of the subdominant ultrametric space associated with the graph provides information useful to investigate the number and nature of the common economic factors affecting the time evolution of logarithm of price of well defined groups of stocks.

arXiv comments
11 pages, 3 figures with 7 panels
Journal reference
DOI
doi:10.1007/s100510050929
Subjects
cond-mat.stat-mechStatistical Mechanics cond-mat.dis-nnDisordered Systems and Neural Networks q-fin.STStatistical Finance

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Discussed in comments1 thread

  1. Network analysis of the credit crisis spread 1 comment

    • The paper is very short. He basically applies principles outlined in the first two papers cited to the market over the last year. "Some distance properties of latent root and vector methods used in multivariate analysis"…

      jfarmerView on HNParent context

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