Correlation, Network and Multifractal Analysis of Global Financial Indices

Sunil Kumar and Nivedita Deo

Papers from arXiv.org

Abstract: We apply RMT, Network and MF-DFA methods to investigate correlation, network and multifractal properties of 20 global financial indices. We compare results before and during the financial crisis of 2008 respectively. We find that the network method gives more useful information about the formation of clusters as compared to results obtained from eigenvectors corresponding to second largest eigenvalue and these sectors are formed on the basis of geographical location of indices. At threshold 0.6, indices corresponding to Americas, Europe and Asia/Pacific disconnect and form different clusters before the crisis but during the crisis, indices corresponding to Americas and Europe are combined together to form a cluster while the Asia/Pacific indices forms another cluster. By further increasing the value of threshold to 0.9, European countries France, Germany and UK constitute the most tightly linked markets. We study multifractal properties of global financial indices and find that financial indices corresponding to Americas and Europe almost lie in the same range of degree of multifractality as compared to other indices. India, South Korea, Hong Kong are found to be near the degree of multifractality of indices corresponding to Americas and Europe. A large variation in the degree of multifractality in Egypt, Indonesia, Malaysia, Taiwan and Singapore may be a reason that when we increase the threshold in financial network these countries first start getting disconnected at low threshold from the correlation network of financial indices. We fit Binomial Multifractal Model (BMFM) to these financial markets.

Date: 2012-02
New Economics Papers: this item is included in nep-eec, nep-ets, nep-eur, nep-fdg, nep-net and nep-sea
References: Add references at CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
http://arxiv.org/pdf/1202.0409 Latest version (application/pdf)

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:arx:papers:1202.0409

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().