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An ever-closer union? Examining the evolution of linkages of European equity markets via minimum spanning trees

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Author Info

  • Gilmore, Claire G.
  • Lucey, Brian M.
  • Boscia, Marian

Abstract

The concept of a minimum spanning tree (MST) is used to study the process of comovements for 21 European Union stock market indices. We show how the minimum spanning tree and its related hierarchical tree evolve over time and describe the dynamics. Over the period studied, 1999–2006, the French equity market provides the main linkages in the system. The 2004 Accession states are more loosely connected to the other markets; they form two groupings, with the Czech Republic, Hungary, and Poland having tighter links to the main markets than the remaining Accession markets. Shorter distances between markets indicate a potential reduction of the benefits of international portfolio diversification in European markets, with the possible exception of those markets at the outer limits of the MST.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 387 (2008)
Issue (Month): 25 ()
Pages: 6319-6329

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Handle: RePEc:eee:phsmap:v:387:y:2008:i:25:p:6319-6329

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: Econophysics; Minimum spanning trees;

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Cited by:
  1. Lee, Junghoon & Youn, Janghyuk & Chang, Woojin, 2012. "Intraday volatility and network topological properties in the Korean stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1354-1360.
  2. Wang, Gang-Jin & Xie, Chi & Han, Feng & Sun, Bo, 2012. "Similarity measure and topology evolution of foreign exchange markets using dynamic time warping method: Evidence from minimal spanning tree," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(16), pages 4136-4146.
  3. Tabak, Benjamin M. & Serra, Thiago R. & Cajueiro, Daniel O., 2010. "Topological properties of stock market networks: The case of Brazil," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(16), pages 3240-3249.
  4. Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2012. "Stock market networks: The dynamic conditional correlation approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(16), pages 4147-4158.
  5. Ulusoy, Tolga & Keskin, Mustafa & Shirvani, Ayoub & Deviren, Bayram & Kantar, Ersin & Çaǧrı Dönmez, Cem, 2012. "Complexity of major UK companies between 2006 and 2010: Hierarchical structure method approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(21), pages 5121-5131.
  6. Trancoso, Tiago, 2014. "Emerging markets in the global economic network: Real(ly) decoupling?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 499-510.
  7. Cheong, Siew Ann & Fornia, Robert Paulo & Lee, Gladys Hui Ting & Kok, Jun Liang & Yim, Woei Shyr & Xu, Danny Yuan & Zhang, Yiting, 2011. "The Japanese economy in crises: A time series segmentation study," Economics Discussion Papers 2011-24, Kiel Institute for the World Economy.
  8. Kantar, Ersin & Keskin, Mustafa, 2013. "The relationships between electricity consumption and GDP in Asian countries, using hierarchical structure methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(22), pages 5678-5684.
  9. Khaldoun Khashanah & Linyan Miao, 2011. "Dynamic structure of the US financial systems," Studies in Economics and Finance, Emerald Group Publishing, vol. 28(4), pages 321-339, October.
  10. Tiago Trancoso, 2013. "Global macroeconomic interdependence: a minimum spanning tree approach," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 5(1), pages 179-189, June.

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