Journal of the Korean Physical Society

, Volume 71, Issue 7, pp 444–451 | Cite as

Changes of hierarchical network in local and world stock market

  • Enayet Ullah Patwary
  • Jong Youl Lee
  • Ashadun Nobi
  • Doo Hwan Kim
  • Jae Woo Lee
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Abstract

We consider the cross-correlation coefficients of the daily returns in the local and global stock markets. We generate the minimal spanning tree (MST) using the correlation matrix. We observe that the MSTs change their structure from chain-like networks to star-like networks during periods of market uncertainty. We quantify the measure of the hierarchical network utilizing the value of the hierarchy measured by the hierarchical path. The hierarchy and betweenness centrality characterize the state of the market regarding the impact of crises. During crises, the non-financial company is established as the central node of the MST. However, before the crisis and during stable periods, the financial company is occupying the central node of the MST in the Korean and the U.S. stock markets. The changes in the network structure and the central node are good indicators of an upcoming crisis.

Keywords

Minimal spanning tree Stock market Hierarchy Complex network 

PACS numbers

89.65.Gh 
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Copyright information

© The Korean Physical Society 2017

Authors and Affiliations

  • Enayet Ullah Patwary
    • 1
  • Jong Youl Lee
    • 1
  • Ashadun Nobi
    • 2
  • Doo Hwan Kim
    • 3
  • Jae Woo Lee
    • 3
  1. 1.Department of Public AdministrationIncheon National UniversityIncheonKorea
  2. 2.Department of Computer Science and Telecommunication EngineeringNoakhali Science and Technology UniversityNoakhaliBangladesh
  3. 3.Department of PhysicsInha UniversityIncheonKorea

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