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Degree stability of a minimum spanning tree of price return and volatility

Author

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  • Miccichè, Salvatore
  • Bonanno, Giovanni
  • Lillo, Fabrizio
  • N. Mantegna, Rosario

Abstract

We investigate the time series of the degree of minimum spanning trees (MSTs) obtained by using a correlation-based clustering procedure which starts from (i) asset return and (ii) volatility time series. The MST is obtained at different times by computing correlation among time series over a time window of fixed length T. We find that the MST of asset return is characterized by stock degree values, which are more stable in time than the ones obtained by analyzing a MST computed starting from volatility time series. Our analysis also shows that the degree of stocks has a very slow dynamics with a time scale of several years in both cases.

Suggested Citation

  • Miccichè, Salvatore & Bonanno, Giovanni & Lillo, Fabrizio & N. Mantegna, Rosario, 2003. "Degree stability of a minimum spanning tree of price return and volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 66-73.
  • Handle: RePEc:eee:phsmap:v:324:y:2003:i:1:p:66-73
    DOI: 10.1016/S0378-4371(03)00002-5
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    1. 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.
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