A complex network for studying the transmission mechanisms in stock market

Wen Long, Lijing Guan, Jiangjian Shen, Linqiu Song and Lingxiao Cui

Physica A: Statistical Mechanics and its Applications, 2017, vol. 484, issue C, 345-357

Abstract: This paper introduces a new complex network to describe the volatility transmission mechanisms in stock market. The network can not only endogenize stock market’s volatility but also figure out the direction of volatility spillover. In this model, we first use BEKK-GARCH to estimate the volatility spillover effects among Chinese 18 industry sectors. Then, based on the ARCH coefficients and GARCH coefficients, the directional shock networks and variance networks in different stages are constructed separately. We find that the spillover effects and network structures changes in different stages. The results of the topological stability test demonstrate that the connectivity of networks becomes more fragile to selective attacks than stochastic attacks.

Keywords: Complex network; BEKK; Volatility spillover effects; Endogenous (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:484:y:2017:i:c:p:345-357

DOI: 10.1016/j.physa.2017.04.043

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