Correlations and dependencies in the global finantial village
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Other documents of the author: Kenett, Dror Y.; Raddant, Matthias; Zatlavi, Lior; Lux, Thomas; Ben-Jacob, Eshel
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comunitat-uji-handle2:10234/8643
comunitat-uji-handle3:10234/8644
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http://dx.doi.org/10.1142/S201019451200774X |
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Title
Correlations and dependencies in the global finantial villageDate
2012Publisher
World Scientific PublishingISSN
2010-1945Bibliographic citation
DROR Y. KENETT et al, Int. J. Mod. Phys. Conf. Ser. 16, 13 (2012)Type
info:eu-repo/semantics/articlePublisher version
http://www.worldscientific.com/doi/abs/10.1142/S201019451200774XSubject
Abstract
The high degree of coupling between global financial markets has made the financial village prone to systemic collapses. Here we present a new methodology to assess and quantify inter-market relations. The approach ... [+]
The high degree of coupling between global financial markets has made the financial village prone to systemic collapses. Here we present a new methodology to assess and quantify inter-market relations. The approach is based on meta-correlations (correlations between the intra-market correlations), and a Dependency Network analysis approach. We investigated the relations between six important world markets — U.S., U.K., Germany, Japan, China and India from January 2000 until December 2010. Our findings show that while the developed Western markets (U.S., U.K., Germany), are highly correlated, the inter-dependencies between these markets and the Eastern markets (India and China) are very volatile and with noticeable maxima at times of global world events. Finally, using the Dependency network approach, we quantify the flow of information between the different markets, and how markets affect each other. We observe that German and U.K. stocks show a large amount of coupling, while other markets are more segmented. These and additional reported findings illustrate that this methodological framework provides a way to quantify interdependencies in the global market and their evolvement, to evaluate the world financial network, and quantify changes in inter-market relations. Such changes can be used as precursors to the agitation of the global financial village. [-]
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International Journal of Modern Physics: Conference Series, 2012, vol. 16Rights
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