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Dependency network and node influence : application to the study of financial markets
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Kenett, Dror Y., Preis, Tobias, Gur-Gershgoren, G. and Ben-Jacob, E. (2012) Dependency network and node influence : application to the study of financial markets. International Journal of Bifurcation and Chaos in Applied Sciences and Engineering, Volume 22 (Number 07). Article number 1250181. doi:10.1142/S0218127412501817 ISSN 0218-1274.
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Official URL: http://dx.doi.org/10.1142/S0218127412501817
Abstract
Much effort has been devoted to assess the importance of nodes in complex networks. Examples of commonly used measures of node importance include node degree, node centrality and node vulnerability score (the effect of the node deletion on the network efficiency). Here we present a new approach to compute and investigate the mutual dependencies between network nodes from the matrices of node–node correlations. The dependency network approach provides a new system level analysis of the activity and topology of directed networks. The approach extracts topological relations between the networks nodes (when the network structure is analyzed), and provides an important step towards inference of causal activity relations between the network nodes (when analyzing the network activity). The resulting dependency networks are a new class of correlation-based networks, and are capable of uncovering hidden information on the structure of the network. Here, we present a review of the new approach, and an example of its application to financial markets. We apply the methodology to the daily closing prices of all Dow Jones Industrial Average (DJIA) index components for the period 1939–2010. Investigating the structure and dynamics of the dependency network across time, we find fingerprints of past financial crises, illustrating the importance of this methodology.
Item Type: | Journal Article | ||||
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Subjects: | Q Science > QC Physics | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Physics , Money market | ||||
Journal or Publication Title: | International Journal of Bifurcation and Chaos in Applied Sciences and Engineering | ||||
Publisher: | World Scientific Publishing Co. Pte. Ltd. | ||||
ISSN: | 0218-1274 | ||||
Official Date: | July 2012 | ||||
Dates: |
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Volume: | Volume 22 | ||||
Number: | Number 07 | ||||
Number of Pages: | 14 | ||||
Article Number: | Article number 1250181 | ||||
DOI: | 10.1142/S0218127412501817 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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