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Structure of local interactions in complex financial dynamics

Author

Listed:
  • X. F. Jiang
  • T. T. Chen
  • B. Zheng

Abstract

With the network methods and random matrix theory, we investigate the interaction structure of communities in financial markets. In particular, based on the random matrix decomposition, we clarify that the local interactions between the business sectors (subsectors) are mainly contained in the sector mode. In the sector mode, the average correlation inside the sectors is positive, while that between the sectors is negative. Further, we explore the time evolution of the interaction structure of the business sectors, and observe that the local interaction structure changes dramatically during a financial bubble or crisis.

Suggested Citation

  • X. F. Jiang & T. T. Chen & B. Zheng, 2014. "Structure of local interactions in complex financial dynamics," Papers 1406.0070, arXiv.org.
  • Handle: RePEc:arx:papers:1406.0070
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    File URL: http://arxiv.org/pdf/1406.0070
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    Cited by:

    1. Chen, Huan & Mai, Yong & Li, Sai-Ping, 2014. "Analysis of network clustering behavior of the Chinese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 414(C), pages 360-367.
    2. repec:eee:phsmap:v:495:y:2018:i:c:p:104-113 is not listed on IDEAS
    3. T. T. Chen & B. Zheng & Y. Li & X. F. Jiang, 2017. "New approaches in agent-based modeling of complex financial systems," Papers 1703.06840, arXiv.org.
    4. Jiang, Xiong-Fei & Zheng, Bo & Ren, Fei & Qiu, Tian, 2017. "Localized motion in random matrix decomposition of complex financial systems," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 154-161.
    5. repec:eee:phsmap:v:517:y:2019:i:c:p:515-521 is not listed on IDEAS
    6. Jun-Jie Chen & Lei Tan & Bo Zheng, 2015. "Agent-based model with multi-level herding for complex financial systems," Papers 1504.01811, arXiv.org.
    7. repec:eee:phsmap:v:514:y:2019:i:c:p:902-915 is not listed on IDEAS
    8. repec:eee:phsmap:v:496:y:2018:i:c:p:593-601 is not listed on IDEAS
    9. Gautier Marti & Frank Nielsen & Miko{l}aj Bi'nkowski & Philippe Donnat, 2017. "A review of two decades of correlations, hierarchies, networks and clustering in financial markets," Papers 1703.00485, arXiv.org, revised Feb 2019.
    10. repec:eee:phsmap:v:515:y:2019:i:c:p:671-681 is not listed on IDEAS
    11. De Caux, Robert & McGroarty, Frank & Brede, Markus, 2017. "The evolution of risk and bailout strategy in banking systems," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 468(C), pages 109-118.
    12. Luu, Duc Thi & Yanovski, Boyan & Lux, Thomas, 2018. "An analysis of systematic risk in worldwide econonomic sentiment indices," Economics Working Papers 2018-03, Christian-Albrechts-University of Kiel, Department of Economics.

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