IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1905.11842.html
   My bibliography  Save this paper

Graph-based era segmentation of international financial integration

Author

Listed:
  • C'ecile Bastidon
  • Antoine Parent
  • Pablo Jensen
  • Patrice Abry
  • Pierre Borgnat

Abstract

Assessing world-wide financial integration constitutes a recurrent challenge in macroeconometrics, often addressed by visual inspections searching for data patterns. Econophysics literature enables us to build complementary, data-driven measures of financial integration using graphs. The present contribution investigates the potential and interests of a novel 3-step approach that combines several state-of-the-art procedures to i) compute graph-based representations of the multivariate dependence structure of asset prices time series representing the financial states of 32 countries world-wide (1955-2015); ii) compute time series of 5 graph-based indices that characterize the time evolution of the topologies of the graph; iii) segment these time evolutions in piece-wise constant eras, using an optimization framework constructed on a multivariate multi-norm total variation penalized functional. The method shows first that it is possible to find endogenous stable eras of world-wide financial integration. Then, our results suggest that the most relevant globalization eras would be based on the historical patterns of global capital flows, while the major regulatory events of the 1970s would only appear as a cause of sub-segmentation.

Suggested Citation

  • C'ecile Bastidon & Antoine Parent & Pablo Jensen & Patrice Abry & Pierre Borgnat, 2019. "Graph-based era segmentation of international financial integration," Papers 1905.11842, arXiv.org.
    • Handle: RePEc:arx:papers:1905.11842
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1905.11842
    File Function: Latest version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. R. Mantegna, 1999. "Hierarchical structure in financial markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 11(1), pages 193-197, September.
    2. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 2011. "What Segments Equity Markets?," The Review of Financial Studies, Society for Financial Studies, vol. 24(12), pages 3841-3890.
    3. Shleifer, Andrei & Summers, Lawrence H, 1990. "The Noise Trader Approach to Finance," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 19-33, Spring.
    4. Giovanni Bonanno & Nicolas Vandewalle & Rosario N. Mantegna, 2000. "Taxonomy of Stock Market Indices," Papers cond-mat/0001268, arXiv.org, revised Aug 2000.
    5. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    6. De Gooijer, Jan G., 2006. "Detecting change-points in multidimensional stochastic processes," Computational Statistics & Data Analysis, Elsevier, vol. 51(3), pages 1892-1903, December.
    7. Geert Bekaert & Campbell R. Harvey, 2000. "Capital Flows and the Behavior of Emerging Market Equity Returns," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 159-194, National Bureau of Economic Research, Inc.
    8. Bekaert, Geert & Harvey, Campbell R. & Lumsdaine, Robin L., 2002. "Dating the integration of world equity markets," Journal of Financial Economics, Elsevier, vol. 65(2), pages 203-247, August.
    9. Jeffrey G. Williamson, 2007. "Global Capital Markets in the Long Run: A Review of Maurice Obstfeld and Alan Taylor's Global Capital Markets," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 400-409, June.
    10. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Economic Review, Federal Reserve Bank of Kansas City, vol. 84(Q IV), pages 17-51.
    11. Tumminello, Michele & Lillo, Fabrizio & Mantegna, Rosario N., 2010. "Correlation, hierarchies, and networks in financial markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(1), pages 40-58, July.
    12. Dong-Ming Song & Michele Tumminello & Wei-Xing Zhou & Rosario N. Mantegna, 2011. "Evolution of worldwide stock markets, correlation structure and correlation based graphs," Papers 1103.5555, arXiv.org.
    13. Galeano, Pedro & Wied, Dominik, 2014. "Multiple break detection in the correlation structure of random variables," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 262-282.
    14. Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bastidon, Cécile & Parent, Antoine & Jensen, Pablo & Abry, Patrice & Borgnat, Pierre, 2020. "Graph-based era segmentation of international financial integration," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 539(C).
    2. repec:hal:spmain:info:hdl:2441/ps168627s85g86i5u1aj5akpm is not listed on IDEAS
    3. M. Raddant & T. Di Matteo, 2023. "A look at financial dependencies by means of econophysics and financial economics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(4), pages 701-734, October.
    4. Sensoy, Ahmet & Tabak, Benjamin M., 2014. "Dynamic spanning trees in stock market networks: The case of Asia-Pacific," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 414(C), pages 387-402.
    5. Sandoval, Leonidas, 2014. "To lag or not to lag? How to compare indices of stock markets that operate on different times," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 403(C), pages 227-243.
    6. Zhang, Xin & Podobnik, Boris & Kenett, Dror Y. & Eugene Stanley, H., 2014. "Systemic risk and causality dynamics of the world international shipping market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 415(C), pages 43-53.
    7. Tao You & Paweł Fiedor & Artur Hołda, 2015. "Network Analysis of the Shanghai Stock Exchange Based on Partial Mutual Information," JRFM, MDPI, vol. 8(2), pages 1-19, June.
    8. Gautier Marti & Frank Nielsen & Miko{l}aj Bi'nkowski & Philippe Donnat, 2017. "A review of two decades of correlations, hierarchies, networks and clustering in financial markets," Papers 1703.00485, arXiv.org, revised Nov 2020.
    9. Andrea Di Iura, 2022. "Comparison of empirical and shrinkage correlation algorithm for clustering methods in the futures market," SN Business & Economics, Springer, vol. 2(8), pages 1-17, August.
    10. Diamandis, Panayiotis F., 2008. "Financial liberalization and changes in the dynamic behaviour of emerging market volatility: Evidence from four Latin American equity markets," Research in International Business and Finance, Elsevier, vol. 22(3), pages 362-377, September.
    11. 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.
    12. Yanhua Chen & Rosario N Mantegna & Athanasios A Pantelous & Konstantin M Zuev, 2018. "A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-40, March.
    13. Teh, Boon Kin & Goo, Yik Wen & Lian, Tong Wei & Ong, Wei Guang & Choi, Wen Ting & Damodaran, Mridula & Cheong, Siew Ann, 2015. "The Chinese Correction of February 2007: How financial hierarchies change in a market crash," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 424(C), pages 225-241.
    14. Donadelli, Michael & Persha, Lauren, 2014. "Understanding emerging market equity risk premia: Industries, governance and macroeconomic policy uncertainty," Research in International Business and Finance, Elsevier, vol. 30(C), pages 284-309.
    15. Civitarese, Jamil, 2016. "Volatility and correlation-based systemic risk measures in the US market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 459(C), pages 55-67.
    16. Výrost, Tomáš & Lyócsa, Štefan & Baumöhl, Eduard, 2015. "Granger causality stock market networks: Temporal proximity and preferential attachment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 427(C), pages 262-276.
    17. Zeitsch, Peter J. & Davis, Tom P., 2021. "The price determinants of contingent convertible bonds," Finance Research Letters, Elsevier, vol. 43(C).
    18. Huang, Wei-Qiang & Zhuang, Xin-Tian & Yao, Shuang & Uryasev, Stan, 2016. "A financial network perspective of financial institutions’ systemic risk contributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 456(C), pages 183-196.
    19. Zhewen Liao & Zhongxing Wang & Kun Guo, 2019. "The dynamic evolution of the characteristics of exchange rate risks in countries along “The Belt and Road” based on network analysis," PLOS ONE, Public Library of Science, vol. 14(9), pages 1-18, September.
    20. Chester Curme & Michele Tumminello & Rosario N. Mantegna & H. Eugene Stanley & Dror Y. Kenett, 2015. "Emergence of statistically validated financial intraday lead-lag relationships," Quantitative Finance, Taylor & Francis Journals, vol. 15(8), pages 1375-1386, August.
    21. Xue Guo & Hu Zhang & Tianhai Tian, 2018. "Development of stock correlation networks using mutual information and financial big data," PLOS ONE, Public Library of Science, vol. 13(4), pages 1-16, April.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1905.11842. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.