CFE 2020: Start Registration
View Submission - CFE
A0330
Title: Stock market as a network Authors:  Marcello Esposito - Universita Cattaneo (Italy) [presenting]
Abstract: Among the statistical techniques used to describe the behaviour of the financial markets, one of the most promising is based on the network analysis of the stock market. In this framework, the stock market is represented as a graph with nodes (the single stocks), edges (connections between stocks), and attributes (industry classification, volumes ). The application of network analysis to the stock market is not new, but in the literature the market graph has been mainly derived from the correlation matrix of the stock prices. This is a limitation and the risks are to express in different words what traditional financial econometrics has already said about the returns distribution. For this reason, we integrated the analysis and built the market graph with new type of data taken from the observation of the information gathering activity performed by retail investors through the Googles search engine. We focussed the attention to financial crises, when a shock hits the economy in such a profound way that almost all the parameters entering the pricing equation of stocks must be reassessed. Those periods are relatively rare and short. They are characterised by extremely high levels of volatility and correlation. In these moments, searching for new information becomes of paramount importance. And then it is in these moments that we expect to observe more neatly the working of the underlying network.