The European Physical Journal B - Condensed Matter and Complex Systems

, Volume 11, Issue 1, pp 193–197

Hierarchical structure in financial markets

Article

DOI: 10.1007/s100510050929

Cite this article as:
Mantegna, R.N. Eur. Phys. J. B (1999) 11: 193. doi:10.1007/s100510050929

Abstract

I find a hierarchical arrangement of stocks traded in a financial market by investigating the daily time series of the logarithm of stock price. The topological space is a subdominant ultrametric space associated with 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 a meaningful economic taxonomy.

PACS. 02.50.Sk Multivariate analysis89.90.+n Other areas of general interest to physicists

Copyright information

© Società Italiana di Fisica, Springer-Verlag 1999

Authors and Affiliations

  1. 1.Istituto Nazionale per la Fisica della MateriaUnità di PalermoPalermoItaly
  2. 2.Dipartimento di Energetica ed Applicazioni di FisicaUniversità di PalermoPalermoItaly