The European Physical Journal B

, 88:321

U.S. stock market interaction network as learned by the Boltzmann machine

  • Stanislav S. Borysov
  • Yasser Roudi
  • Alexander V. Balatsky
Regular Article

DOI: 10.1140/epjb/e2015-60282-3

Cite this article as:
Borysov, S., Roudi, Y. & Balatsky, A. Eur. Phys. J. B (2015) 88: 321. doi:10.1140/epjb/e2015-60282-3

Abstract

We study historical dynamics of joint equilibrium distribution of stock returns in the U.S. stock market using the Boltzmann distribution model being parametrized by external fields and pairwise couplings. Within Boltzmann learning framework for statistical inference, we analyze historical behavior of the parameters inferred using exact and approximate learning algorithms. Since the model and inference methods require use of binary variables, effect of this mapping of continuous returns to the discrete domain is studied. The presented results show that binarization preserves the correlation structure of the market. Properties of distributions of external fields and couplings as well as the market interaction network and industry sector clustering structure are studied for different historical dates and moving window sizes. We demonstrate that the observed positive heavy tail in distribution of couplings is related to the sparse clustering structure of the market. We also show that discrepancies between the model’s parameters might be used as a precursor of financial instabilities.

Keywords

Statistical and Nonlinear Physics 

Copyright information

© EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  • Stanislav S. Borysov
    • 1
    • 2
  • Yasser Roudi
    • 1
    • 3
  • Alexander V. Balatsky
    • 4
    • 1
  1. 1.Nordita, Center for Quantum Materials, KTH Royal Institute of Technology and Stockholm UniversityStockholmSweden
  2. 2.Nanostructure Physics, KTH Royal Institute of TechnologyStockholmSweden
  3. 3.The Kavli Institute for Systems Neuroscience, NTNUTrondheimNorway
  4. 4.Institute for Materials Science, Los Alamos National LaboratoryLos AlamosUSA

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