(1) Istituto Nazionale per la Fisica della Materia, Unità di Palermo, 90128, Palermo, Italy Dipartimento di Energetica ed Applicazioni di Fisica, Università di Palermo, Viale delle Scienze, 90128, Palermo, Italy, IT
Abstract:
I find a hierarchical arrangement of stocks traded in a financial market by investigating the daily time series of the logarithm
of stock price. The topological space is a subdominant ultrametric space associated with a graph connecting the stocks of
the portfolio analyzed. The graph is obtained starting from the matrix of correlation coefficient computed between all pairs
of stocks of the portfolio by considering the synchronous time evolution of the difference of the logarithm of daily stock
price. The hierarchical tree of the subdominant ultrametric space associated with the graph provides a meaningful economic
taxonomy.
Received 24 March 1999 and Received in final form 28 June 1999