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A complex networks based analysis of jump risk in equity returns: An evidence using intraday movements from Pakistan stock market

Author

Listed:
  • Faheem Aslam

    (COMSATS University Islamabad)

  • Yasir Tariq Mohmand

    (COMSATS University Islamabad)

  • Saqib Aziz

    (ESC [Rennes] - ESC Rennes School of Business)

  • Jamal Ouenniche

    (Edin. - University of Edinburgh)

Abstract

We employ a multi-stage methodology combining complex network analytics and financial risk modelling to unveil the correlation structures amongst the price jump risks of companies forming the KSE-100 index in Pakistan. We identify the most influential companies in terms of jump risk, and identify communities — clusters of companies with similar price movement characteristics or with highly correlated price jumps. We find that equities in Pakistan stock market experience jumps in different time periods that are correlated to varying degrees within and across industries resulting in 19 different communities, four of which are strongly connected. While Oil & Gas, Cement and Banking sectors exhibit a significant representation of firms in communities, the automobile industry, however, seems to play an important role in risk propagation. These results provide an interesting insight to investors and other stakeholders from an emerging market viewpoint identifying the major sectors driving the volatility of KSE-100 index.

Suggested Citation

  • Faheem Aslam & Yasir Tariq Mohmand & Saqib Aziz & Jamal Ouenniche, 2020. "A complex networks based analysis of jump risk in equity returns: An evidence using intraday movements from Pakistan stock market," Post-Print hal-03160685, HAL.
    • Handle: RePEc:hal:journl:hal-03160685
    DOI: 10.1016/j.jbef.2020.100418
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-03160685
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    References listed on IDEAS

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    Keywords

    Complex network analysis; Intraday returns; Realised jumps; Realised volatility; Jump risk;
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