The Spread of the Credit Crisis: View from a Stock Correlation Network

Reginald Smith

MPRA Paper from University Library of Munich, Germany

Abstract: The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain markets, in this case the US equity markets, follow a cascade or epidemic flow like model along the correlations of various stocks. A few images and explanation here will suffice to show the phenomenon. Also, whether the idea of "epidemic" or a "cascade" is a metaphor or model for this crisis will be discussed. Animations of the spread of the crisis are available at http://reggiesmithsci.googlepages.com/creditcrisis

Keywords: networks; econophysics; equities; stock market; correlation; credit crisis (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2008-11-11, Revised 2008-12-02
New Economics Papers: this item is included in nep-fmk, nep-net, nep-rmg and nep-ure
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https://mpra.ub.uni-muenchen.de/12659/1/MPRA_paper_12659.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/13631/2/MPRA_paper_13631.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/15453/1/MPRA_paper_15453.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/15610/1/MPRA_paper_15610.pdf revised version (application/pdf)

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