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Effects of global financial crisis on network structure in a local stock market

Author

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  • Nobi, Ashadun
  • Maeng, Seong Eun
  • Ha, Gyeong Gyun
  • Lee, Jae Woo

Abstract

This study considers the effects of the 2008 global financial crisis on threshold networks of a local Korean financial market around the time of the crisis. Prices of individual stocks belonging to KOSPI 200 (Korea Composite Stock Price Index 200) are considered for three time periods, namely before, during, and after the crisis. Threshold networks are constructed from fully connected cross-correlation networks, and thresholds of cross-correlation coefficients are assigned to obtain threshold networks. At the high threshold, only one large cluster consisting of firms in the financial sector, heavy industry, and construction is observed during the crisis. However, before and after the crisis, there are several fragmented clusters belonging to various sectors. The power law of the degree distribution in threshold networks is observed within the limited range of thresholds. Threshold networks are fatter during the crisis than before or after the crisis. The clustering coefficient of the threshold network follows the power law in the scaling range.

Suggested Citation

  • Nobi, Ashadun & Maeng, Seong Eun & Ha, Gyeong Gyun & Lee, Jae Woo, 2014. "Effects of global financial crisis on network structure in a local stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 407(C), pages 135-143.
    • Handle: RePEc:eee:phsmap:v:407:y:2014:i:c:p:135-143
    DOI: 10.1016/j.physa.2014.03.083
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