Unveiling correlations between financial variables and topological metrics of trading networks: Evidence from a stock and its warrant

Ming-Xia Li, Zhi-Qiang Jiang, Wen-Jie Xie, Xiong Xiong, Wei Zhang and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2015, vol. 419, issue C, 575-584

Abstract: Traders develop and adopt different trading strategies attempting to maximize their profits in financial markets. These trading strategies not only result in specific topological structures in trading networks, which connect the traders with the pairwise buy–sell relationships, but also have potential impacts on market dynamics. Here, we present a detailed analysis on how the market behaviors are correlated with the structures of traders in trading networks based on audit trail data for the Baosteel stock and its warrant at the transaction level from 22 August 2005 to 23 August 2006. In our investigation, we divide each trade day into 48 rolling time windows with a length of 5 min, construct a trading network within each window, and obtain a time series of over 11,600 trading networks. We find that there are strongly simultaneous correlations between the topological metrics (including network centralization, assortative index, and average path length) of trading networks that characterize the patterns of order execution and the financial variables (including return, volatility, intertrade duration, and trading volume) for the stock and its warrant. Our analysis may shed new lights on how the microscopic interactions between elements within complex system affect the system’s performance.

Keywords: Econophysics; Trading network; Order flow; Correlation; Stock; Warrant (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437114008772
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: Unveiling correlations between financial variables and topological metrics of trading networks: Evidence from a stock and its warrant (2013)
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:419:y:2015:i:c:p:575-584

DOI: 10.1016/j.physa.2014.10.039

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 ().