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Contagion Pattern Identification Through Minimum Spanning Trees During The Asian Financial Crisis

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  • MARICA, Vasile-George

    (Faculty of International Business and Economics, Bucharest University of Economic Studies, Bucharest, Romania.)

Abstract

Complexity in financial markets is slowly overwhelming canonical statistical modelling. With global crises which stemming from contagion effects becoming more frequent, new tools for financial distress transmission capture are needed. Graph theory, with its branch on minimum spanning trees can help researchers better represent the numerous multivariate and asynchronous interactions that suddenly manifest during moments of market panic. Under the current research, a novel graphical methodology is employed for the description of the 1997 Asian financial crisis. It is shown that market sentiment can have an interpretable image through the use of correlation based minimum spanning trees, a useful tool for policy makers and risk managers alike. Classification-JEL: C10, C18, C14, C38, C88

Suggested Citation

  • MARICA, Vasile-George, 2019. "Contagion Pattern Identification Through Minimum Spanning Trees During The Asian Financial Crisis," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(2), pages 75-96, June.
    • Handle: RePEc:vls:finstu:v:23:y:2019:i:2:p:75-96
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    More about this item

    Keywords

    correlation matrix; graph theory; minimum spanning tree;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software

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