Financial fluctuations anchored to economic fundamentals: A mesoscopic network approach.

ABSTRACT: We demonstrate the existence of an empirical linkage between nominal financial networks and the underlying economic fundamentals, across countries. We construct the nominal return correlation networks from daily data to encapsulate sector-level dynamics and infer the relative importance of the sectors in the nominal network through measures of centrality and clustering algorithms. Eigenvector centrality robustly identifies the backbone of the minimum spanning tree defined on the return networks as well as the primary cluster in the multidimensional scaling map. We show that the sectors that are relatively large in size, defined with three metrics, viz., market capitalization, revenue and number of employees, constitute the core of the return networks, whereas the periphery is mostly popula

SUBMITTER: Sharma K 

PROVIDER: S-EPMC5556004 | biostudies-literature | 2017 Aug

REPOSITORIES: biostudies-literature