Multiresolution transmission of the correlation modes between bivariate time series based on complex network theory

Xuan Huang, Haizhong An, Xiangyun Gao, Xiaoqing Hao and Pengpeng Liu

Physica A: Statistical Mechanics and its Applications, 2015, vol. 428, issue C, 493-506

Abstract: This study introduces an approach to study the multiscale transmission characteristics of the correlation modes between bivariate time series. The correlation between the bivariate time series fluctuates over time. The transmission among the correlation modes exhibits a multiscale phenomenon, which provides richer information. To investigate the multiscale transmission of the correlation modes, this paper describes a hybrid model integrating wavelet analysis and complex network theory to decompose and reconstruct the original bivariate time series into sequences in a joint time–frequency domain and defined the correlation modes at each time–frequency domain. We chose the crude oil spot and futures prices as the sample data. The empirical results indicate that the main duration of volatility (32–64 days) for the strongly positive correlation between the crude oil spot price and the futures price provides more useful information for investors. Moreover, the weighted degree, weighted indegree and weighted outdegree of the correlation modes follow power-law distributions. The correlation fluctuation strengthens the extent of persistence over the long term, whereas persistence weakens over the short and medium term. The primary correlation modes dominating the transmission process and the major intermediary modes in the transmission process are clustered both in the short and long term.

Keywords: Correlation mode; Time series; Complex network; Wavelet analysis; Crude oil price (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:428:y:2015:i:c:p:493-506

DOI: 10.1016/j.physa.2015.02.028

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