Reframing the S&P 500 network of stocks along the 21st century

Tanya Araújo and Maximilian Göbel

Physica A: Statistical Mechanics and its Applications, 2019, vol. 526, issue C

Abstract: Based on a sample of 296 stocks from the S&P 500, the time-varying network structure within three distinct two-year periods since the beginning of the 21st century was analyzed. Logged first-differences of daily stock prices serve as input for a correlation-based distance measure between any two of the 296 stocks. The computation of a Minimal Spanning Tree then abstracts from a complete network and allows for a topological analysis of the resulting community structure. Both the Great Recession (2007–2008) and the Global Commodity Crisis (2010–2011) reveal tendencies of enhanced community formation compared to a formerly rather randomized network structure. Nevertheless, the drivers of the resulting clustering are found not to be related to industry sector affiliation.

Keywords: S&P 500; Network analysis; Minimal spanning trees; Industrial clusters; Great recession; Global commodity crisis; Community detection (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:526:y:2019:i:c:s0378437119306478

DOI: 10.1016/j.physa.2019.121062

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