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Characteristics of the Polish Stock Market correlations

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  • Galazka, Marek
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    Abstract

    In this paper a network structure of the Polish Stock Market (PSM), one of the emerging markets, is studied. The conceptions: Minimum Spanning Tree (MST) and Weighted Random Graph (WRG), constructed among companies listed on this stock exchange, are compared. In these models denote each vertex a stock and the weight assigned to each edge in WRG is the cross-correlation coefficients. The Influence-Strength (IS) is at each vertex in both models defined: in WRG as the sum of the weights on the edges upon that vertex, in MST as the vertex degree. The IS distribution follows a power law with exponent r = 1.8 in WRG and [delta] = 2.2 in MST. Both results show that there must be a few stocks whose price fluctuations can powerfully influence the price dynamics of other stocks in the same market. In both cases these are the same companies.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 20 (2011)
    Issue (Month): 1 (January)
    Pages: 1-5

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    Handle: RePEc:eee:finana:v:20:y:2011:i:1:p:1-5

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    Web page: http://www.elsevier.com/locate/inca/620166

    Related research

    Keywords: Emerging markets Scale-free network Complex system Random graph Financial correlations;

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    1. G. Bonanno & G. Caldarelli & F. Lillo & S. Micciche` & N. Vandewalle & R. N. Mantegna, 2004. "Networks of equities in financial markets," Papers cond-mat/0401300, arXiv.org.
    2. Vasiliki Plerou & Parameswaran Gopikrishnan & Bernd Rosenow & Luis A. Nunes Amaral & H. Eugene Stanley, 1999. "Universal and non-universal properties of cross-correlations in financial time series," Papers cond-mat/9902283, arXiv.org.
    3. R. Mantegna, 1999. "Hierarchical structure in financial markets," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 11(1), pages 193-197, September.
    4. Gebka, Bartosz, 2008. "Volume- and size-related lead-lag effects in stock returns and volatility: An empirical investigation of the Warsaw Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 17(1), pages 134-155.
    5. Giovanni Bonanno & Fabrizio Lillo & Rosario N. Mantegna, 2000. "High-frequency Cross-correlation in a Set of Stocks," Papers cond-mat/0009350, arXiv.org, revised Nov 2000.
    6. Onnela, J.-P. & Chakraborti, A. & Kaski, K. & Kertész, J., 2003. "Dynamic asset trees and Black Monday," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 247-252.
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