The predictive power of local properties of financial networks

Petre Caraiani

Physica A: Statistical Mechanics and its Applications, 2017, vol. 466, issue C, 79-90

Abstract: The literature on analyzing the dynamics of financial networks has focused so far on the predictive power of global measures of networks like entropy or index cohesive force. In this paper, I show that the local network properties have similar predictive power. I focus on key network measures like average path length, average degree or cluster coefficient, and also consider the diameter and the s-metric. Using Granger causality tests, I show that some of these measures have statistically significant prediction power with respect to the dynamics of aggregate stock market. Average path length is most robust relative to the frequency of data used or specification (index or growth rate). Most measures are found to have predictive power only for monthly frequency. Further evidences that support this view are provided through a simple regression model.

Keywords: Networks; Prediction; Forecasts (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437116305490
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:
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:466:y:2017:i:c:p:79-90

DOI: 10.1016/j.physa.2016.08.032

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 ().