Dynamic asset trees and Black Monday

J. P. Onnela; A. Chakraborti; K. Kaski; J. Kertész

doi:10.1016/S0378-4371(02)01882-4

Dynamic asset trees and Black Monday

J. P. Onnela, A. Chakraborti^*, K. Kaski, J. Kertész

^*Corresponding author for this work

Research output: Contribution to journal › Conference article › peer-review

Abstract (may include machine translation)

The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns. The dynamics of this asset tree can be characterised by its normalised length and the mean occupation layer, as measured from an appropriately chosen centre called the 'central node'. We show how the tree length shrinks during a stock market crisis, Black Monday in this case, and how a strong reconfiguration takes place, resulting in topological shrinking of the tree.

Original language	English
Pages (from-to)	247-252
Number of pages	6
Journal	Physica A: Statistical Mechanics and its Applications
Volume	324
Issue number	1-2
DOIs	https://doi.org/10.1016/S0378-4371(02)01882-4
State	Published - 1 Jun 2003
Externally published	Yes
Event	Proceedings of the International Econophysics Conference - Bali, Indonesia Duration: 29 Aug 2002 → 31 Aug 2002

Keywords

Market crash
Minimum spanning tree
Time dependency of stock correlations

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10.1016/S0378-4371(02)01882-4

Cite this

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AU - Kaski, K.

AU - Kertész, J.

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N2 - The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns. The dynamics of this asset tree can be characterised by its normalised length and the mean occupation layer, as measured from an appropriately chosen centre called the 'central node'. We show how the tree length shrinks during a stock market crisis, Black Monday in this case, and how a strong reconfiguration takes place, resulting in topological shrinking of the tree.

AB - The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns. The dynamics of this asset tree can be characterised by its normalised length and the mean occupation layer, as measured from an appropriately chosen centre called the 'central node'. We show how the tree length shrinks during a stock market crisis, Black Monday in this case, and how a strong reconfiguration takes place, resulting in topological shrinking of the tree.

KW - Market crash

KW - Minimum spanning tree

KW - Time dependency of stock correlations

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DO - 10.1016/S0378-4371(02)01882-4

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VL - 324

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JO - Physica A: Statistical Mechanics and its Applications

JF - Physica A: Statistical Mechanics and its Applications

IS - 1-2

T2 - Proceedings of the International Econophysics Conference

Y2 - 29 August 2002 through 31 August 2002

ER -

Dynamic asset trees and Black Monday

Abstract (may include machine translation)

Keywords

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