Economy – Quantitative Finance – Statistical Finance
Scientific paper
2010-09-29
Economy
Quantitative Finance
Statistical Finance
elsarticle class, includes amsmath.sty, graphicx.sty and url.sty. 68 pages, 16 figures, 8 tables. Abridged version of the manu
Scientific paper
We calculated the cross correlations between the half-hourly times series of the ten Dow Jones US economic sectors over the period February 2000 to August 2008, the two-year intervals 2002--2003, 2004--2005, 2008--2009, and also over 11 segments within the present financial crisis, to construct minimal spanning trees (MSTs) of the US economy at the sector level. In all MSTs, a core-fringe structure is found, with consumer goods, consumer services, and the industrials consistently making up the core, and basic materials, oil and gas, healthcare, telecommunications, and utilities residing predominantly on the fringe. More importantly, we find that the MSTs can be classified into two distinct, statistically robust, topologies: (i) star-like, with the industrials at the center, associated with low-volatility economic growth; and (ii) chain-like, associated with high-volatility economic crisis. Finally, we present statistical evidence, based on the emergence of a star-like MST in Sep 2009, and the MST staying robustly star-like throughout the Greek Debt Crisis, that the US economy is on track to a recovery.
Cheong Siew Ann
Kok Jun Liang
Prusty Manamohan
Ting Lee Gladys Hui
Wong Jian Cheng
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