The evolution of interdependence in world equity markets—Evidence from minimum spanning trees

Ricardo Coelho, Claire G. Gilmore, Brian Lucey, Peter Richmond and Stefan Hutzler

Physica A: Statistical Mechanics and its Applications, 2007, vol. 376, issue C, 455-466

Abstract: The concept of a minimum spanning tree is used to study the process of market integration for a large group of national stock market indices. We show how the asset tree evolves over time and describe the dynamics of its normalized length, mean occupation layer, and single- and multiple-step linkage survival rates. Over the period studied, 1997–2006, the tree shows a tendency to become more compact. This implies that global equity markets are increasingly interrelated. The consequence for global investors is a potential reduction of the benefits of international portfolio diversification.

Keywords: Econophysics; Minimal spanning trees (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (75)

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Working Paper: The Evolution of Interdependence in World Equity Markets - Evidence from Minimum Spanning Trees (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:376:y:2007:i:c:p:455-466

DOI: 10.1016/j.physa.2006.10.045

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