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On Stock Market Dynamics through Ultrametricity of Minimum Spanning Tree

Author

Listed:
  • Hokky Situngkir

    (Bandung Fe Institute)

  • Yohanes Surya

    (Surya Research International)

Abstract

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.

Suggested Citation

  • Hokky Situngkir & Yohanes Surya, 2005. "On Stock Market Dynamics through Ultrametricity of Minimum Spanning Tree," Macroeconomics 0505010, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0505010
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0505/0505010.pdf
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    References listed on IDEAS

    as
    1. G. Bonanno & F. Lillo & R. N. Mantegna, 2001. "High-frequency cross-correlation in a set of stocks," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 96-104.
    2. 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.
    3. repec:cup:macdyn:v:4:y:2000:i:2:p:170-96 is not listed on IDEAS
    4. Makowiec, D., 2004. "On modeling of inefficient market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 36-40.
    5. 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.
    6. Cont, Rama & Bouchaud, Jean-Philipe, 2000. "Herd Behavior And Aggregate Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 4(2), pages 170-196, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Situngkir, Hokky, 2012. "Indonesian Stock Market Crisis Observation with Spectral and Composite Index," MPRA Paper 35961, University Library of Munich, Germany.
    2. Pang, Raymond Ka-Kay & Granados, Oscar M. & Chhajer, Harsh & Legara, Erika Fille T., 2021. "An analysis of network filtering methods to sovereign bond yields during COVID-19," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    3. Yusuf Yargı BAYDİLLİ & Şafak BAYIR & İlker TÜRKER, 2017. "A Hierarchical View of a National Stock Market as a Complex Network," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(1), pages 205-222.
    4. Situngkir, Hokky, 2015. "On Capturing the Spreading Dynamics over Trading Prices in the Market," MPRA Paper 67247, University Library of Munich, Germany.
    5. Situngkir, Hokky, 2015. "Indonesia embraces the Data Science," MPRA Paper 66048, University Library of Munich, Germany.
    6. 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.
    7. Situngkir, Hokky & Surya, Yohanes, 2006. "Kerangka Kerja Ekonofisika dalam Basel II," MPRA Paper 896, University Library of Munich, Germany.
    8. Khashanah, Khaldoun & Yang, Hanchao, 2016. "Evolutionary systemic risk: Fisher information flow metric in financial network dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 445(C), pages 318-327.
    9. Raymond Ka-Kay Pang & Oscar Granados & Harsh Chhajer & Erika Fille Legara, 2020. "An analysis of network filtering methods to sovereign bond yields during COVID-19," Papers 2009.13390, arXiv.org, revised Feb 2021.
    10. Yao, Hongxing & Memon, Bilal Ahmed, 2019. "Network topology of FTSE 100 Index companies: From the perspective of Brexit," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 1248-1262.

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    More about this item

    Keywords

    ultrametricity; minimum spanning tree; liquidity; Jakarta Stock Exchange.;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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