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Dynamic asset trees and Black Monday


  • Onnela, J.-P.
  • Chakraborti, A.
  • Kaski, K.
  • Kertész, J.


The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns. The dynamics of this asset tree can be characterised by its normalised length and the mean occupation layer, as measured from an appropriately chosen centre called the ‘central node’. We show how the tree length shrinks during a stock market crisis, Black Monday in this case, and how a strong reconfiguration takes place, resulting in topological shrinking of the tree.

Suggested Citation

  • Onnela, J.-P. & Chakraborti, A. & Kaski, K. & Kertész, J., 2003. "Dynamic asset trees and Black Monday," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 247-252.
  • Handle: RePEc:eee:phsmap:v:324:y:2003:i:1:p:247-252 DOI: 10.1016/S0378-4371(02)01882-4

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    References listed on IDEAS

    1. Woodford, Michael, 1990. "The optimum quantity of money," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 20, pages 1067-1152 Elsevier.
    2. Timothy J. Kehoe & David K. Levine & Michael Woodford, 1990. "The optimum quantity of money revisited," Working Papers 404, Federal Reserve Bank of Minneapolis.
    3. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    4. Shi, Shouyong, 1999. "Money, capital, and redistributive effects of monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 565-590, February.
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