Networks of Stock Prices in the Capital Market

Hokky Situngkir and Hasan Muhammad Aldy

MPRA Paper from University Library of Munich, Germany

Abstract: Thecollectivemovementofstockpricesharborscomplexinterdependenciesthatareconventionally simplified only through a linear lens. This paper explores structural network representations in the Indonesian capital market by testing the limits of Pearson correlation and Mutual Information (MI) in unveiling the spectral dynamics of the market. Across 2,328 rolling observation windows from 2015 to 2025, we examine 24 methodological configurations that combine three dependency estimators (Pearson, MI adaptive binning, and MI-kNN), two graph filtering schemes (Minimum Spanning Tree/MST and Planar Maximally Filtered Graph/PMFG), and four community decoders. The empirical results unveil a fundamental reality: topological richness does not always resonate with sectoral classification precision. The Pearson, MST, and Infomap configuration is shown to remain the most robust foundation for recovering conventional sectoral taxonomy. Nevertheless, when deeper observation demands the exposition of local structures and the weave of heterogeneous communities, the architectural relaxation through PMFG demonstrates its superiority. In the realm of residual information detection, MI adaptive binning appears far more proportional than kNN; histogram-based regularization successfully tames empirical noise without sweeping away traces of non-linear dependency. Ultimately, the synergy of MI and PMFG is not positioned to dethrone the dominance of linear correlation, but ratherto provide an essenti alanalytical lens for excavating hidden economic sub-structures—such as the cohesion of commodity regimes—that have long transcended the rigid boundaries of the market’s formal sectors.

Keywords: Econophysics; stock prices; Minimum Spanning Tree (MST); Planar Maximally Filtered Graph (PMFG); Mutual Information; community detection; financial networks (search for similar items in EconPapers)
JEL-codes: C1 C6 G11 G28 M0 (search for similar items in EconPapers)
Date: 2026-04-25
New Economics Papers: this item is included in nep-net
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/128875/1/MPRA_paper_128875.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128875

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().