Is the efficiency of stock market correlated with multifractality? An evidence from the Shanghai stock market

In this paper, we propose an efficiency index and multifractality degree for financial markets, and investigate the dynamics of the relationship between the two indices for the Shanghai stock market employing the technique of rolling window. By using the DCCA cross-correlation coefficient, we find that, for the Shanghai stock market, the increase in the degree of market multifractality can lead to a lower degree of market efficiency before the equity division reforms, whereas it can result in a lower degree of market efficiency in the short-term and a higher degree of market efficiency in the long-term after the equity division reforms. This finding reflects the process of development of the Shanghai stock market and also provides strong evidence which supports Liu’s argument that the increase in the degree of market complexity can improve the market efficiency Liu (2009) [1].     

Extracting hidden fluctuation patterns of Hang Seng stock index from network topologies

We present a model of complex network generated from Hang Seng index (HSI) of Hong Kong stock market, which encodes stock market relevant both interconnections and interactions between fluctuation patterns of HSI in the network topologies. In the network, the nodes (edges) represent all kinds of patterns of HSI fluctuation (their interconnections). Based on network topological statistic, we present efficient algorithms, measuring betweenness centrality (BC) and inverse participation ratio (IPR) of network adjacency matrix, for detecting topological important nodes. We have at least obtained three uniform nodes of topological importance, and find the three nodes, i.e. 18.7% nodes undertake 71.9% betweenness centrality and closely correlate other nodes. From these topological important nodes, we can extract hidden significant fluctuation patterns of HSI. We also find these patterns are independent the time intervals scales. The results contain important physical implication, i.e. the significant patterns play much more important roles in both information control and transport of stock market, and should be useful for us to more understand fluctuations regularity of stock market index. Moreover, we could conclude that Hong Kong stock market, rather than a random system, is statistically stable, by comparison to random networks.     

Topological phases: An expedition off lattice

Motivated by the goal to give the simplest possible microscopic foundation for a broad class of topological phases, we study quantum mechanical lattice models where the topology of the lattice is one of the dynamical variables. However, a fluctuating geometry can remove the separation between the system size and the range of local interactions, which is important for topological protection and ultimately the stability of a topological phase. In particular, it can open the door to a pathology, which has been studied in the context of quantum gravity and goes by the name of ‘baby universe’, here we discuss three distinct approaches to suppressing these pathological fluctuations. We complement this discussion by applying Cheeger’s theory relating the geometry of manifolds to their vibrational modes to study the spectra of Hamiltonians. In particular, we present a detailed study of the statistical properties of loop gas and string net models on fluctuating lattices, both analytically and numerically.     

Behavioural breaks in the heterogeneous agent model: The impact of herding,overconfidence, and market sentiment

The main aim of this work is to incorporate selected findings from behavioural finance into a Heterogeneous Agent Model using the Brock and Hommes (1998) [34] framework. Behavioural patterns are injected into an asset pricing framework through the so-called ‘Break Point Date’, which allows us to examine their direct impact. In particular, we analyse the dynamics of the model around the behavioural break. Price behaviour of 30 Dow Jones Industrial Average constituents covering five particularly turbulent US stock market periods reveals interesting patterns in this aspect. To replicate it, we apply numerical analysis using the Heterogeneous Agent Model extended with the selected findings from behavioural finance: herding, overconfidence, and market sentiment. We show that these behavioural breaks can be well modelled via the Heterogeneous Agent Model framework and they extend the original model considerably. Various modifications lead to significantly different results and model with behavioural breaks is also able to partially replicate price behaviour found in the data during turbulent stock market periods.     

Topological properties of stock market networks: The case of Brazil

This paper investigates the topological properties of the Brazilian stock market networks. We build the minimum spanning tree, which is based on the concept of ultrametricity, using the correlation matrix for a variety of stocks of different sectors. Our results suggest that stocks tend to cluster by sector. We employ a dynamic approach using complex network measures and find that the relative importance of different sectors within the network varies. The financial, energy and material sectors are the most important within the network.     

High-order fuzzy time-series based on multi-period adaptation model for forecasting stock markets

Stock investors usually make their short-term investment decisions according to recent stock information such as the late market news, technical analysis reports, and price fluctuations. To reflect these short-term factors which impact stock price, this paper proposes a comprehensive fuzzy time-series, which factors linear relationships between recent periods of stock prices and fuzzy logical relationships (nonlinear relationships) mined from time-series into forecasting processes. In empirical analysis, the TAIEX (Taiwan Stock Exchange Capitalization Weighted Stock Index) and HSI (Heng Seng Index) are employed as experimental datasets, and four recent fuzzy time-series models, Chen’s (1996), Yu’s (2005), Cheng’s (2006) and Chen’s (2007), are used as comparison models. Besides, to compare with conventional statistic method, the method of least squares is utilized to estimate the auto-regressive models of the testing periods within the databases. From analysis results, the performance comparisons indicate that the multi-period adaptation model, proposed in this paper, can effectively improve the forecasting performance of conventional fuzzy time-series models which only factor fuzzy logical relationships in forecasting processes. From the empirical study, the traditional statistic method and the proposed model both reveal that stock price patterns in the Taiwan stock and Hong Kong stock markets are short-term.     

A study of the interplay between the structure variation and fluctuations of the Shanghai stock market

The intricate interplay between the variation of the stock network structure and fluctuations of that stock market is increasingly becoming a hot topic. In this work, employing a moving window to scan through every stock price time series over a period from 2 January 2001 to 7 December 2010, we use mutual information to measure the statistical interdependence between stock prices, and we construct a corresponding network for 501 Shanghai stocks in every given window. Then we address the time-varying relationships between the structure variation and fluctuations for the Shanghai stock market. All the results obtained here indicate that at turning points the growing independence of stocks causes the scalefreeness of the degree distribution to be disrupted, and that the Shanghai stock index has little volatility clustering. In contrast, under normality of the market, the stock networks have characteristics of scalefree degree distribution. Furthermore, the degree of volatility clustering is a little higher.     

Network analysis of a financial market based on genuine correlation and threshold method

A financial market is an example of an adaptive complex network consisting of many interacting units. This network reflects market’s behavior. In this paper, we use Random Matrix Theory (RMT) notion for specifying the largest eigenvector of correlation matrix as the market mode of stock network. For a better risk management, we clean the correlation matrix by removing the market mode from data and then construct this matrix based on the residuals. We show that this technique has an important effect on correlation coefficient distribution by applying it for Dow Jones Industrial Average (DJIA). To study the topological structure of a network we apply the removing market mode technique and the threshold method to Tehran Stock Exchange (TSE) as an example. We show that this network follows a power-law model in certain intervals. We also show the behavior of clustering coefficients and component numbers of this network for different thresholds. These outputs are useful for both theoretical and practical purposes such as asset allocation and risk management.     

Using conditional probability to identify trends in intra-day high-frequency equity pricing

By examining the conditional probabilities of price movements in a popular US stock over different high-frequency intra-day timespans, varying levels of trend predictability are identified. This study demonstrates the existence of predictable short-term trends in the market; understanding the probability of price movement can be useful to high-frequency traders. Price movement was examined in trade-by-trade (tick) data along with temporal timespans between 1 s to 30 min for 52 one-week periods for one highly-traded stock. We hypothesize that much of the initial predictability of trade-by-trade (tick) data is due to traditional market dynamics, or the bouncing of the price between the stock’s bid and ask. Only after timespans of between 5 to 10 s does this cease to explain the predictability; after this timespan, two consecutive movements in the same direction occur with higher probability than that of movements in the opposite direction. This pattern holds up to a one-minute interval, after which the strength of the pattern weakens.     

Systemic risk on different interbank network topologies

In this paper we develop an interbank market with heterogeneous financial institutions that enter into lending agreements on different network structures. Credit relationships (links) evolve endogenously via a fitness mechanism based on agents’ performance. By changing the agent’s trust on its neighbor’s performance, interbank linkages self-organize themselves into very different network architectures, ranging from random to scale-free topologies. We study which network architecture can make the financial system more resilient to random attacks and how systemic risk spreads over the network. To perturb the system, we generate a random attack via a liquidity shock. The hit bank is not automatically eliminated, but its failure is endogenously driven by its incapacity to raise liquidity in the interbank network. Our analysis shows that a random financial network can be more resilient than a scale free one in case of agents’ heterogeneity.     

Minimal spanning tree problem in stock networks analysis: An efficient algorithm

Since the last decade, minimal spanning trees (MSTs) have become one of the main streams in econophysics to filter the important information contained, for example, in stock networks. The standard practice to find an MST is by using Kruskal’s algorithm. However, it becomes slower and slower when the number of stocks gets larger and larger. In this paper we propose an algorithm to find an MST which has considerably promising performance. It is significantly faster than Kruskal’s algorithm and far faster if there is only one unique MST in the network. Our approach is based on the combination of fuzzy relation theory and graph theoretical properties of the forest of all MSTs. A comparison study based on real data from four stock markets and four types of simulated data will be presented to illustrate the significant advantages of the proposed algorithm.     

A quantum statistical approach to simplified stock markets

We use standard perturbation techniques originally formulated in quantum (statistical) mechanics in the analysis of a toy model of a stock market which is given in terms of bosonic operators. In particular we discuss the probability of transition from a given value of the portfolio of a certain trader to a different one. This computation can also be carried out using some kind of Feynman graphs adapted to the present context.     

Optimal dynamic bandwidth allocation for complex networks

Traffic capacity of one network strongly depends on the link’s bandwidth allocation strategy. In previous bandwidth allocation mechanisms, once one link’s bandwidth is allocated, it will be fixed throughout the overall traffic transmission process. However, the traffic load of every link changes from time to time. In this paper, with finite total bandwidth resource of the network, we propose to dynamically allocate the total bandwidth resource in which each link’s bandwidth is proportional to the queue length of the output buffer of the link per time step. With plenty of data packets in the network, the traffic handling ability of all links of the network achieves full utilization. The theoretical analysis and the extensive simulation results on complex networks are consistent. This work is valuable for network service providers to improve network performance or to do reasonable network design efficiently.     

Homological stabilizer codes

In this paper we define homological stabilizer codes on qubits which encompass codes such as Kitaev’s toric code and the topological color codes. These codes are defined solely by the graphs they reside on. This feature allows us to use properties of topological graph theory to determine the graphs which are suitable as homological stabilizer codes. We then show that all toric codes are equivalent to homological stabilizer codes on 4-valent graphs. We show that the topological color codes and toric codes correspond to two distinct classes of graphs. We define the notion of label set equivalencies and show that under a small set of constraints the only homological stabilizer codes without local logical operators are equivalent to Kitaev’s toric code or to the topological color codes.     

Structural and topological phase transitions on the German Stock Exchange

We find numerical and empirical evidence for dynamical, structural and topological phase transitions on the (German) Frankfurt Stock Exchange (FSE) in the temporal vicinity of the worldwide financial crash. Using the Minimal Spanning Tree (MST) technique, a particularly useful canonical tool of the graph theory, two transitions of the topology of a complex network representing the FSE were found. The first transition is from a hierarchical scale-free MST representing the stock market before the recent worldwide financial crash, to a superstar-like MST decorated by a scale-free hierarchy of trees representing the market’s state for the period containing the crash. Subsequently, a transition is observed from this transient, (meta)stable state of the crash to a hierarchical scale-free MST decorated by several star-like trees after the worldwide financial crash. The phase transitions observed are analogous to the ones we obtained earlier for the Warsaw Stock Exchange and more pronounced than those found by Onnela–Chakraborti–Kaski–Kertész for the S&P 500 index in the vicinity of Black Monday (October 19, 1987) and also in the vicinity of January 1, 1998. Our results provide an empirical foundation for the future theory of dynamical, structural and topological phase transitions on financial markets.     

基于节点拓扑特征的中国基金公司共持网络持股行为波动相关性

选取2003—2012年期间半年度中国基金公司持上市公司股票份额面板数据为样本数据,以基金公司为节点,以同一时刻共持同一家上市公司股票关系为边,以同一时刻共持的上市公司数量为权重,构建中国基金公司共持关系结构等价加权网络(简称共持网络).结合统计物理学等方法,分析了共持网络的拓扑结构稳定性及具有不同拓扑特征值的节点随时间演变过程中与共持网络中三类节点集合持股行为波动相关性.三类节点集合分别为t-1时刻基于某一股票形成的共持关系完全连通子图节点集合(第一类节点集合)、t-1时刻共持网络中非完全连通子图的节点集合(第二类节点集合)、t时刻新进入共持网络的节点集合(第三类节点集合).分析结果显示:1)节点与第二类节点集合持股行为波动呈正相关,且相关系数随着节点集聚系数的增强而增大;2)只有当节点的度和点强度值较高时,节点与第一类和第二类节点集合的持股行为呈正相关;3)不同拓扑特征条件下的节点与第三类节点集合的持股行为均不存在波动相关性.本文提供了一个研究持股行为相关性的新思路,并为进一步研究股票市场结构等价网络及节点重要性差异提供了基础.     

A model for the spread of rumors in Barrat–Barthelemy–Vespignani (BBV) networks

Rumor propagation is a typical form of social communication and plays a significant role in social life. In this paper, we studied the process of rumor propagation by accounting for the mechanism of forgetting in Barrat–Barthelemy–Vespignani (BBV) networks. First, we derived mean-field equations for rumor propagation based on the strength of the nodes in the propagation network. We then analyzed the stability of the model to determine whether a propagation threshold existed in the BBV networks. We also conducted numerical simulations of the BBV networks and found that rumors propagate more slowly in BBV networks than in unweighted networks. The numerical simulation results also demonstrated that as the forgetting rate increases, the rumor’s influence decreases in both BBV networks and unweighted networks. Finally, the simulation results confirmed that a threshold exists for rumor propagation in BBV networks, but that it was independent of the value of the stifling rate.     

Multiple scale analysis of complex networks using the empirical mode decomposition method

Empirical mode decomposition (EMD) method can decompose any complicated data into finite ‘intrinsic mode functions’ (IMFs). In this paper, we use EMD method to analyze and discuss the structural properties of complex networks. A random-walk method is used to collect the data series of network systems. Utilizing the EMD method, we decompose the obtained data into finite IMFs under different spatial scales. The analysis results show that EMD method is an effective tool for capturing the topological properties of network systems under different spatial scales, such as the modular structures of network systems and their energy densities.     

Urban road network evolution mechanism based on the ‘direction preferred connection’ and ‘degree constraint’

The urban road network is a complex system that exhibits the properties of self-organization and emergence. Recent theoretical and empirical studies have mainly focused on the structural properties of the urban road networks. This research concentrates on some important parameters such as degree, average degree, meshedness coefficient, betweeness, etc. These parameters of the real road network exhibit specific statistical properties. Some studies show that perhaps these specific statistical properties are caused by a compromise mechanism of the formation of a minimum spanning tree and the greedy triangulation. Inspired by these results, we propose a principle to construct the network (we call it a MG network in this paper) whose structure is located between the minimum spanning tree and the greedy triangulation at first. The structural properties of the MG network are analyzed. We find the formation mechanism of the MG network cannot explain the urban road network evolution well. Then, based on the formation mechanism of the MG network, we add the ‘direction preferred connection’ and ‘degree constraint’ principles to the urban road network evolution simulation process. The result of the simulation network turns out to be a planar network that is in accordance with reality. Compared with the real road network’s structural properties, we find the simulation results are so consistent with it. It indicates the validation of the model and also demonstrates perhaps the ‘direction preferred connection’ and ‘degree constraint’ principle can explain the urban road network evolution better.     

Reputation-based network selection mechanism using game theory

Current and future wireless environments are based on the coexistence of multiple networks supported by various access technologies deployed by different operators. As wireless network deployments increase, their usage is also experiencing a significant growth. In this heterogeneous multi-technology multi-application multi-terminal multi-user environment users will be able to freely connect to any of the available access technologies. Network selection mechanisms will be required in order to keep mobile users “always best connected” anywhere and anytime. In such a heterogeneous environment, game theory techniques can be adopted in order to understand and model competitive or cooperative scenarios between rational decision makers. In this work we propose a theoretical framework for combining reputation-based systems, game theory and network selection mechanism. We define a network reputation factor which reflects the network’s previous behaviour in assuring service guarantees to the user. Using the repeated Prisoner’s Dilemma game, we model the user–network interaction as a cooperative game and we show that by defining incentives for cooperation and disincentives against defecting on service guarantees, repeated interaction sustains cooperation.