Asset Trees and Asset Graphs in Financial Markets

J. P. Onnela, A. Chakraborti, K. Kaski, J. Kertész, A. Kanto

Research output: Contribution to journalConference articlepeer-review

Abstract (may include machine translation)

This paper introduces a new methodology for constructing a network of companies called a dynamic asset graph. This is similar to the dynamic asset tree studied recently, as both are based on correlations between asset returns. However, the new modified methodology does not, in general, lead to a tree but a disconnected graph. The asset tree, due to the minimum spanning tree criterion, is forced to "accept" edge lengths that are far less optimal (longer) than the asset graph, thus resulting in higher overall length for the tree. The same criterion also causes asset trees to be more fragile in structure when measured by the single-step survival ratio. Over longer time periods, in the beginning the asset graph decays more slowly than the asset tree, but in the long run the situation is reversed. The vertex degree distributions indicate that the possible scale free behavior of the asset graph is not as evident as it is in the case of the asset tree.

Original languageEnglish
Pages (from-to)48-54
Number of pages7
JournalPhysica Scripta T
Volume106
StatePublished - 2003
Externally publishedYes
EventPhysics of Random Networks, Econophysics and Models of Biophysics and Sociophysics - Kolkata, India
Duration: 20 Mar 200322 Mar 2003

Fingerprint

Dive into the research topics of 'Asset Trees and Asset Graphs in Financial Markets'. Together they form a unique fingerprint.

Cite this