| Issue |
EPL
Volume 131, Number 5, September 2020
|
|
|---|---|---|
| Article Number | 50001 | |
| Number of page(s) | 7 | |
| Section | General | |
| DOI | https://doi.org/10.1209/0295-5075/131/50001 | |
| Published online | 18 September 2020 | |
A network-based method for detecting critical events of correlation dynamics in financial markets
School of Statistics and Mathematics, Zhejiang Gongshang University - Hangzhou 310018, China
Received: 12 February 2020
Accepted: 10 August 2020
In recent years, the dynamics of the financial correlation matrix has been widely studied. This study applies the Frobenius distance-based kNN (k nearest neighbour) network to analyse the time-varying characteristics of the correlation matrix, especially during the period of drastic change. We use the influence-strength (IS) index to detect when the correlation matrix structure changes dramatically. Based on the data from the US stock market, we tested the effectiveness of the method. The IS-based method accurately detects some important events from the 2008 crisis to the 2020 crisis. Our calculations indicate that IS-based analysis provides an effective tool for analysing financial correlation dynamics.
PACS: 05.90.+m – Other topics in statistical physics, thermodynamics, and nonlinear dynamical systems (restricted to new topics in section 05) / 05.45.Tp – Time series analysis / 02.10.Yn – Matrix theory
© 2020 EPLA
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