Identifying critical financial networks of the DJIA: Toward a network-based index

Authors

  • Frank Emmert-Streib,

    Corresponding author
    1. Computational Biology and Machine Learning, Center for Cancer Research and Cell Biology, School of Medicine, Dentistry and Biomedical Sciences, Queen's University Belfast, Belfast, BT9 7BL, Northern Ireland, United Kingdom
    2. Department of Biostatistics and Genome Sciences, University of Washington, Seattle, Washington 98195-5065
    • Queen's University Belfast, 97 Lisburn Road, Belfast, BT9 7BL, Northern Ireland, United Kingdom
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  • Matthias Dehmer

    1. Institute for Bioinformatics and Translational Research, UMIT, Eduard Wallnoefer Zentrum 1, 6060, A-Hall in Tyrol, Austria
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Abstract

The purpose of this article is twofold. First, we introduce a novel definition of financial networks obtained from time series data from the stock market. Second, we demonstrate that these networks can be used as an index with the property to reflect critical states of the market, respectively, crashes sufficiently. Our work aims to advocate a network-based analysis in the context of the stock market, because such a collective phenomenon can not only be economically described by networks but also analyzed as demonstrated in this article. © 2010 Wiley Periodicals, Inc. Complexity 16: 24–33, 2010

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