The European Physical Journal B

, Volume 73, Issue 1, pp 3–11 | Cite as

The use of dynamical networks to detect the hierarchical organization of financial market sectors

  • T. Di Matteo
  • F. Pozzi
  • T. AsteEmail author
Topical Issue on Interdisciplinary Applications of Physics in Economics and Finance


Two kinds of filtered networks: minimum spanning trees (MSTs) and planar maximally filtered graphs (PMFGs) are constructed from dynamical correlations computed over a moving window. We study the evolution over time of both hierarchical and topological properties of these graphs in relation to market fluctuations. We verify that the dynamical PMFG preserves the same hierarchical structure as the dynamical MST, providing in addition a more significant and richer structure, a stronger robustness and dynamical stability. Central and peripheral stocks are differentiated by using a combination of different topological measures. We find stocks well connected and central; stocks well connected but peripheral; stocks poorly connected but central; stocks poorly connected and peripheral. It results that the Financial sector plays a central role in the entire system. The robustness, stability and persistence of these findings are verified by changing the time window and by performing the computations on different time periods. We discuss these results and the economic meaning of this hierarchical positioning.


Minimum Span Tree Hierarchical Organization Market Sector Strong Robustness Hierarchical Position 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  1. 1.Applied Mathematics, Research School of Physical Sciences, The Australian National UniversityCanberraAustralia
  2. 2.Department of MathematicsKing’s College, The StrandLondonUK
  3. 3.School of Physical Sciences, University of KentCanterbury, KentUK

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