Influence of the time scale on the construction of financial networks

Frank Emmert-Streib, Matthias Dehmer

Research output: Contribution to journalArticleScientificpeer-review

25 Citations (Scopus)

Abstract

Background: In this paper we investigate the definition and formation of financial networks. Specifically, we study the influence of the time scale on their construction. Methodology/Principal Findings: For our analysis we use correlation-based networks obtained from the daily closing prices of stock market data. More precisely, we use the 30 stocks that currently comprise the Dow Jones Industrial Average (DJIA) and estimate financial networks where nodes correspond to stocks and edges correspond to none vanishing correlation coefficients. That means only if a correlation coefficient is statistically significant different from zero, we include an edge in the network. This construction procedure results in unweighted, undirected networks. By separating the time series of stock prices in non-overlapping intervals, we obtain one network per interval. The length of these intervals corresponds to the time scale of the data, whose influence on the construction of the networks will be studied in this paper.Conclusions/Significance: Numerical analysis of four different measures in dependence on the time scale for the construction of networks allows us to gain insights about the intrinsic time scale of the stock market with respect to a meaningful graph-theoretical analysis.

Original languageEnglish
Article numbere12884
Pages (from-to)1-9
Number of pages9
JournalPLoS ONE
Volume5
Issue number9
DOIs
Publication statusPublished - 30 Sep 2010
Externally publishedYes
Publication typeA1 Journal article-refereed

ASJC Scopus subject areas

  • Agricultural and Biological Sciences(all)
  • Biochemistry, Genetics and Molecular Biology(all)
  • Medicine(all)

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