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Emerging interdependence between stock values during financial crashes

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  • Jacopo Rocchi
  • Enoch Yan Lok Tsui
  • David Saad

Abstract

To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures to extract direct influences between multiple time series, we compute the information flow across stock values to identify several different regimes. While small information flows is detected in most of the period, a dramatically different situation occurs in the proximity of global financial crises, where stock values exhibit strong and substantial interdependence for a prolonged period. This behavior is consistent with what one would generally expect from a complex system near criticality in physical systems, showing the long lasting effects of crashes on stock markets.

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  • Jacopo Rocchi & Enoch Yan Lok Tsui & David Saad, 2016. "Emerging interdependence between stock values during financial crashes," Papers 1611.02549, arXiv.org.
    • Handle: RePEc:arx:papers:1611.02549
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    Cited by:

    1. 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 Nov 2020.

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