Abstract
Financial markets are complex systems that comprise of many agents interacting with each other as well as responding to external information. Earlier studies on the cross-correlations of price movements of different stocks have revealed the interaction structure of various financial markets—which has resulted in the intriguing speculation that the evolution of a market from emerging or developing to developed status is accompanied by systematic changes in its interaction structure. Using a very large data-base of daily price changes of equities listed in the New York Stock Exchange we have investigated the long-term changes that this financial market has undergone over a period of nearly nine decades (1925–2012). We have used spectral analysis of the daily log-return cross-correlations in order to reveal the network of significant interactions between equities. We find that the distribution of interaction strengths varies with the state of the economy. In particular, the skewness of the distribution shows a remarkable increase in recent years. We have investigated the strength distribution over the network in different periods by treating the network as resulting from a percolation process where the threshold value of interaction strength for deciding whether to connect a pair of nodes is varied. We find that the formation of the giant component can occur very differently in different periods—which reflects the micro-structure of the interactions between the equities.
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Acknowledgments
We would like to thank Wharton Research Data Service (WRDS) for providing access to the CRSP database. This work is supported in part by the IMSc Econophysics (XII Plan) Project.
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Kuyyamudi, C., Chakrabarti, A.S., Sinha, S. (2015). Long-Term Evolution of the Topological Structure of Interactions Among Stocks in the New York Stock Exchange 1925–2012. In: Abergel, F., Aoyama, H., Chakrabarti, B., Chakraborti, A., Ghosh, A. (eds) Econophysics and Data Driven Modelling of Market Dynamics. New Economic Windows. Springer, Cham. https://doi.org/10.1007/978-3-319-08473-2_3
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DOI: https://doi.org/10.1007/978-3-319-08473-2_3
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