A complex networks based analysis of jump risk in equity returns: An evidence using intraday movements from Pakistan stock market

Faheem Aslam, Yasir Tariq Mohmand, Saqib Aziz and Jamal Ouenniche
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Faheem Aslam: CUI - COMSATS University Islamabad
Yasir Tariq Mohmand: CUI - COMSATS University Islamabad
Jamal Ouenniche: The University of Edinburgh

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Abstract: We employ a multi-stage methodology combining complex network analytics and financial risk modelling to unveil the correlation structures amongst the price jump risks of companies forming the KSE-100 index in Pakistan. We identify the most influential companies in terms of jump risk, and identify communities — clusters of companies with similar price movement characteristics or with highly correlated price jumps. We find that equities in Pakistan stock market experience jumps in different time periods that are correlated to varying degrees within and across industries resulting in 19 different communities, four of which are strongly connected. While Oil & Gas, Cement and Banking sectors exhibit a significant representation of firms in communities, the automobile industry, however, seems to play an important role in risk propagation. These results provide an interesting insight to investors and other stakeholders from an emerging market viewpoint identifying the major sectors driving the volatility of KSE-100 index.

Keywords: Complex network analysis; Intraday returns; Realised jumps; Realised volatility; Jump risk (search for similar items in EconPapers)
Date: 2020-12
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Published in Journal of Behavioral and Experimental Finance, 2020, 28, pp.100418. ⟨10.1016/j.jbef.2020.100418⟩

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Journal Article: A complex networks based analysis of jump risk in equity returns: An evidence using intraday movements from Pakistan stock market (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03160685

DOI: 10.1016/j.jbef.2020.100418

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