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A Hierarchical View of a National Stock Market as a Complex Network

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  • Yusuf Yargı BAYDİLLİ
  • Şafak BAYIR
  • İlker TÜRKER

    (Karabuk University)

Abstract

We created a financial network for Borsa Istanbul 100 Index (BIST–100) which forms of N=100 stocks that bargained during T=2 years (2011– 2013). We analyzed the market via minimum spanning tree (MST) and hierarchical tree (HT) by using filtered correlation matrix. While using hierarchical methods in order to investigate factors that affecting grouping of stocks, we have taken account the other statistical and data mining methods to examine success of stock correlation network concept for portfolio optimization, risk management and crisis analysis. We observed that financial stocks, especially Banks, are central position of the network and control information flow. Besides the sectoral and sub-sectoral behavior, corporations play role at grouping of stocks. Finally, this technique provided important tips for determining risky stocks in market.

Suggested Citation

  • Yusuf Yargı BAYDİLLİ & Şafak BAYIR & İlker TÜRKER, 2017. "A Hierarchical View of a National Stock Market as a Complex Network," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(1), pages 205-222.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:1:p:205-222
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    References listed on IDEAS

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    Cited by:

    1. Wang, Yanli & Li, Huajiao & Guan, Jianhe & Liu, Nairong, 2019. "Similarities between stock price correlation networks and co-main product networks: Threshold scenarios," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 516(C), pages 66-77.

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    More about this item

    Keywords

    Stock correlation network; stock market; financial network; correlation-based clustering; degree distribution; Istanbul Stock Exchange; minimum spanning tree; hierarchical tree.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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