The scale-free topology of market investments

Diego Garlaschelli, Stefano Battiston, Maurizio Castri, Vito D.P. Servedio and Guido Caldarelli

Physica A: Statistical Mechanics and its Applications, 2005, vol. 350, issue 2, 491-499

Abstract: We propose a network description of large market investments, where both stocks and shareholders are represented as vertices connected by weighted links corresponding to shareholdings. In this framework, the in-degree (kin) and the sum of incoming link weights (v) of an investor correspond to the number of assets held (portfolio diversification) and to the invested wealth (portfolio volume), respectively. An empirical analysis of three different real markets reveals that the distributions of both kin and v display power-law tails with exponents γ and α. Moreover, we find that kin scales as a power-law function of v with an exponent β. Remarkably, despite the values of α, β and γ differ across the three markets, they are always governed by the scaling relation β=(1-α)/(1-γ). We show that these empirical findings can be reproduced by a recent model relating the emergence of scale-free networks to an underlying Paretian distribution of ‘hidden’ vertex properties.

Keywords: Complex networks; Econophysics; Wealth distribution; Pareto's law (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (63)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437104014943
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
Working Paper: The scale-free topology of market investments (2004)
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:eee:phsmap:v:350:y:2005:i:2:p:491-499

DOI: 10.1016/j.physa.2004.11.040

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().