Clustering of Casablanca stock market based on hurst exponent estimates

Salim Lahmiri

Physica A: Statistical Mechanics and its Applications, 2016, vol. 456, issue C, 310-318

Abstract: This paper deals with the problem of Casablanca Stock Exchange (CSE) topology modeling as a complex network during three different market regimes: general trend characterized by ups and downs, increasing trend, and decreasing trend. In particular, a set of seven different Hurst exponent estimates are used to characterize long-range dependence in each industrial sector generating process. They are employed in conjunction with hierarchical clustering approach to examine the co-movements of the Casablanca Stock Exchange industrial sectors. The purpose is to investigate whether cluster structures are similar across variable, increasing and decreasing regimes. It is observed that the general structure of the CSE topology has been considerably changed over 2009 (variable regime), 2010 (increasing regime), and 2011 (decreasing regime) time periods. The most important findings follow. First, in general a high value of Hurst exponent is associated to a variable regime and a small one to a decreasing regime. In addition, Hurst estimates during increasing regime are higher than those of a decreasing regime. Second, correlations between estimated Hurst exponent vectors of industrial sectors increase when Casablanca stock exchange follows an upward regime, whilst they decrease when the overall market follows a downward regime.

Keywords: Hurst exponent; Estimation methods; Clustering; Stock market topology (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:456:y:2016:i:c:p:310-318

DOI: 10.1016/j.physa.2016.03.069

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