Economy – Quantitative Finance – Statistical Finance
Scientific paper
2008-05-16
Eur. Phys. J. B 63, 265--271 (2008)
Economy
Quantitative Finance
Statistical Finance
To appear in EPJ-B
Scientific paper
10.1140/epjb/e2008-00237-3
We investigate the properties of correlation based networks originating from economic complex systems, such as the network of stocks traded at the New York Stock Exchange (NYSE). The weaker links (low correlation) of the system are found to contribute to the overall connectivity of the network significantly more than the strong links (high correlation). We find that nodes connected through strong links form well defined communities. These communities are clustered together in more complex ways compared to the widely used classification according to the economic activity. We find that some companies, such as General Electric (GE), Coca Cola (KO), and others, can be involved in different communities. The communities are found to be quite stable over time. Similar results were obtained by investigating markets completely different in size and properties, such as the Athens Stock Exchange (ASE). The present method may be also useful for other networks generated through correlations.
Argyrakis Panos
Garas Antonios
Havlin Shlomo
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