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Contagion in the World's Stock Exchanges Seen as a Set of Coupled Oscillators

Author

Listed:
  • Lucia Bellenzier

    (Department of Statistics and Quantitative Methods University of Milano-Bicocca - Department of Statistics and Quantitative Methods University of Milano-Bicocca)

  • Jørgen Vitting Andersen

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Giulia Rotundo

    (Department of Methods and Models for Economics, Territory and Finance Sapienza University of Rome - Department of Methods and Models for Economics, Territory and Finance Sapienza University of Rome)

Abstract

We study how the phenomenon of contagion can take place in the network of the world's stock exchanges when each stock exchange acts as an integrate-and-fire oscillator. The characteristic non-linear price behavior of the integrate-and-fire oscillators is supported by empirical data and has a behavioral origin. One advantage of the integrate-and-fire dynamics is that it enables for a direct identification of cause and effect of price movements, without the need for statistical tests such as for example Granger causality tests often used in the identification of causes of contagion. Our methodology can thereby identify the most relevant nodes with respect to onset of contagion in the network of stock exchanges, as well as identify potential periods of high vulnerability of the network. The model is characterized by a separation of time scales created by a slow build up of stresses, for example due to (say monthly/yearly) macroeconomic factors, and then a fast (say hourly/daily) release of stresses through " price-quakes " of price movements across the worlds network of stock exchanges.

Suggested Citation

  • Lucia Bellenzier & Jørgen Vitting Andersen & Giulia Rotundo, 2016. "Contagion in the World's Stock Exchanges Seen as a Set of Coupled Oscillators," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01215620, HAL.
  • Handle: RePEc:hal:cesptp:hal-01215620
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01215620
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Naji Massad & Jørgen Vitting Andersen, 2017. "Three different ways synchronization can cause contagion in financial markets," Documents de travail du Centre d'Economie de la Sorbonne 17059, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Tudorel Andrei & Bogdan Oancea & Peter Richmond & Gurjeet Dhesi & Claudiu Herteliu, 2017. "Decomposition of the Inequality of Income Distribution by Income Types - Application for Romania," Papers 1709.07960, arXiv.org.
    3. repec:eee:phsmap:v:519:y:2019:i:c:p:72-81 is not listed on IDEAS
    4. Naji Massad & Jørgen-Vitting Andersen, 2017. "Three different ways synchronization can cause contagion in financial markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01673333, HAL.
    5. repec:eee:phsmap:v:499:y:2018:i:c:p:436-442 is not listed on IDEAS

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