The structural role of weak and strong links in a financial market network |
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Authors: | A Garas P Argyrakis S Havlin |
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Institution: | (1) Department of Physics, University of Thessaloniki, 54124 Thessaloniki, Greece;(2) Minerva Center and Department of Physics, Bar-Ilan University, Ramat Gan, 52900, Israel |
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Abstract: | 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. |
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Keywords: | PACS" target="_blank">PACS 89 65 -s Social and economic systems 89 75 -k Complex systems 89 90 +n Other topics in areas of applied and interdisciplinary physics |
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