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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
    Note: Type of Document - pdf; pages: 18
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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. Makowiec, D., 2004. "On modeling of inefficient market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 36-40.
    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. 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.
    5. 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.
    6. repec:cup:macdyn:v:4:y:2000:i:2:p:170-96 is not listed on IDEAS
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    Citations

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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 May 2018.
    2. Situngkir, Hokky, 2012. "Indonesian Stock Market Crisis Observation with Spectral and Composite Index," MPRA Paper 35961, University Library of Munich, Germany.
    3. Situngkir, Hokky & Surya, Yohanes, 2006. "Kerangka Kerja Ekonofisika dalam Basel II," MPRA Paper 896, University Library of Munich, Germany.
    4. repec:cys:ecocyb:v:50:y:2017:i:1:p:205-222 is not listed on IDEAS
    5. Situngkir, Hokky, 2015. "On Capturing the Spreading Dynamics over Trading Prices in the Market," MPRA Paper 67247, University Library of Munich, Germany.
    6. 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.
    7. Situngkir, Hokky, 2015. "Indonesia embraces the Data Science," MPRA Paper 66048, University Library of Munich, Germany.

    More about this item

    Keywords

    ultrametricity; minimum spanning tree; liquidity; Jakarta Stock Exchange.;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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