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On Stock Market Dynamics through Ultrametricity of Minimum Spanning Tree

  • Hokky Situngkir

    (Bandung Fe Institute)

  • Yohanes Surya

    (Surya Research International)

We analyze the evolving price °uctuations by using ultrametric distance of minimally spanning ¯nancial tree of stocks traded in Jakarta Stock Exchange 2000-2004. Ultrametricity is derived from transformation of correlation coe±cients into the distances among stocks. Our analysis evaluates the performance of ups and downs of stock prices and discovers the evolution towards the ¯nancial and economic stabilization in Indonesia. This is partly recognized by mapping the hierarchical trees upon the realization of liquid and illiquid stocks. We remind that the methodology is useful in two terms: the evaluation of spectral market movements and intuitively understanding for portfolio management purposes.

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File URL: http://128.118.178.162/eps/mac/papers/0505/0505010.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0505010.

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Length: 18 pages
Date of creation: 12 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0505010
Note: Type of Document - pdf; pages: 18
Contact details of provider: Web page: http://128.118.178.162

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  1. Bonanno, Giovanni & Lillo, Fabrizio & Mantegna, Rosario N., 2001. "Levels of complexity in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 16-27.
  2. Cont, Rama & Bouchaud, Jean-Philipe, 2000. "Herd Behavior And Aggregate Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 4(02), pages 170-196, June.
  3. Rama Cont & Jean-Philippe Bouchaud, 1997. "Herd behavior and aggregate fluctuations in financial markets," Science & Finance (CFM) working paper archive 500028, Science & Finance, Capital Fund Management.
  4. Giovanni Bonanno & Fabrizio Lillo & Rosario N. Mantegna, 2000. "High-frequency Cross-correlation in a Set of Stocks," Papers cond-mat/0009350, arXiv.org, revised Nov 2000.
  5. repec:cup:macdyn:v:4:y:2000:i:2:p:170-96 is not listed on IDEAS
  6. Makowiec, D., 2004. "On modeling of inefficient market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 36-40.
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