Instability of networks: effects of sampling frequency and extreme fluctuations in financial data

Jalshayin Bhachech (), Arnab Chakrabarti (), Taisei Kaizoji () and Anindya S. Chakrabarti ()
Additional contact information
Jalshayin Bhachech: Indian Institute of Management Ahmedabad
Arnab Chakrabarti: Indian Institute of Management Ahmedabad
Taisei Kaizoji: International Christian University
Anindya S. Chakrabarti: Indian Institute of Management Ahmedabad

The European Physical Journal B: Condensed Matter and Complex Systems, 2022, vol. 95, issue 4, 1-14

Abstract: Abstract What determines the stability of networks inferred from dynamical behavior of a system? Internal and external shocks in a system can destabilize the topological properties of comovement networks. In real-world data, this creates a trade-off between identification of turbulent periods and the problem of high dimensionality. Longer time-series reduces the problem of high dimensionality, but suffers from mixing turbulent and non-turbulent periods. Shorter time-series can identify periods of turbulence more accurately, but introduces the problem of high dimensionality, so that the underlying linkages cannot be estimated precisely. In this paper, we exploit high-frequency multivariate financial data to analyze the origin of instability in the inferred networks during periods free from external disturbances. We show that the topological properties captured via centrality ordering is highly unstable even during such non-turbulent periods. Simulation results with multivariate Gaussian and fat-tailed stochastic process calibrated to financial data show that both sampling frequencies and the presence of outliers cause instability in the inferred network. We conclude that instability of network properties do not necessarily indicate systemic instability. Graphical abstract

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1140/epjb/s10051-022-00332-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:eurphb:v:95:y:2022:i:4:d:10.1140_epjb_s10051-022-00332-x

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10051

DOI: 10.1140/epjb/s10051-022-00332-x

Access Statistics for this article

The European Physical Journal B: Condensed Matter and Complex Systems is currently edited by P. Hänggi and Angel Rubio

More articles in The European Physical Journal B: Condensed Matter and Complex Systems from Springer, EDP Sciences
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().