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Constructing financial network based on PMFG and threshold method

Chun-Xiao Nie and Fu-Tie Song

Physica A: Statistical Mechanics and its Applications, 2018, vol. 495, issue C, 104-113

Abstract: Based on planar maximally filtered graph (PMFG) and threshold method, we introduced a correlation-based network named PMFG-based threshold network (PTN). We studied the community structure of PTN and applied ISOMAP algorithm to represent PTN in low-dimensional Euclidean space. The results show that the community corresponds well to the cluster in the Euclidean space. Further, we studied the dynamics of the community structure and constructed the normalized mutual information (NMI) matrix. Based on the real data in the market, we found that the volatility of the market can lead to dramatic changes in the community structure, and the structure is more stable during the financial crisis.

Keywords: Planar maximally filtered graph; Threshold network; Community structure; Cluster algorithm (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:phsmap:v:495:y:2018:i:c:p:104-113