Contagion in the world's stock exchanges seen as a set of coupled oscillators

Lucia Bellenzier, Jørgen Vitting Andersen () and Giulia Rotundo
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Lucia Bellenzier: Department of Statistics - University of Milano-Bicocca
Jørgen Vitting Andersen: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr
Giulia Rotundo: Department of Methods and Models for Economics - Sapienza University of Rome

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We study how the phenomenon of contagion can take place in the network of the world's stock exchanges when each stock exchange acts as an integrate-and-fire oscillator. The characteristic non-linear price behavior of the integrate-and-fire oscillators is supported by empirical data and has a behavioral origin. One advantage of the integrate-and-fire dynamics is that it enables for a direct identification of cause and effect of price movements, without the need for statistical statistical tests such as for example Granger causality tests often used in the identification of causes of contagion. Our methodology can thereby identify the most relevant nodes with respect to onset of contagion in the network of stock exchanges, as well as identify potential periods of high vulnerability of the network. The model is characterized by a separation of time scales created by a slow build up of stresses, for example due to (say monthly/yearly) macroeconomic factors and then a fast (say hourly/daily) release of stresses through “price-quakes” of price movements across the worlds network of stock exchanges

Keywords: Price-quake; complex system; integrate-and-fire oscillators (search for similar items in EconPapers)
JEL-codes: C0 C6 G0 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2015-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15078

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