Tribes under Threat – The Collective Behavior of Firms During the Stock Market Crisis
AbstractDue to their unpredictable behavior, stock markets are examples of complex systems. Yet, the dominant analysis of these markets as- sumes simple stochastic variations, eventually tainted by short-lived memory. This paper proposes an alternative strategy, based on a stochastic geometry de¯ning a robust index of the structural dynamics of the markets and based on notions of topology de¯ning a new coef- ficient that identifies the structural changes occurring on the S&P500 set of stocks. The results demonstrate the consistency of the random hypothesis as applied to normal periods but they also show its in- adequacy as to the analysis of periods of turbulence, for which the emergence of collective behavior of sectoral clusters of firms is mea- sured. This behavior is identified as a meta-routine.
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Bibliographic InfoPaper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2008/28.
Date of creation: Apr 2008
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