The scale-free topology of market investments

Diego Garlaschelli, Stefano Battiston, Maurizio Castri, Vito D. P. Servedio and Guido Caldarelli

Papers from arXiv.org

Abstract: We propose a network description of large market investments, where both stocks and shareholders are represented as vertices connected by weighted links corresponding to shareholdings. In this framework, the in-degree ($k_{in}$) and the sum of incoming link weights ($v$) of an investor correspond to the number of assets held (\emph{portfolio diversification}) and to the invested wealth (\emph{portfolio volume}) respectively. An empirical analysis of three different real markets reveals that the distributions of both $k_{in}$ and $v$ display power-law tails with exponents $\gamma$ and $\alpha$. Moreover, we find that $k_{in}$ scales as a power-law function of $v$ with an exponent $\beta$. Remarkably, despite the values of $\alpha$, $\beta$ and $\gamma$ differ across the three markets, they are always governed by the scaling relation $\beta=(1-\alpha)/(1-\gamma)$. We show that these empirical findings can be reproduced by a recent model relating the emergence of scale-free networks to an underlying Paretian distribution of `hidden' vertex properties.

Date: 2003-10, Revised 2004-12
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published in Physica A 350 (2-4), 491-499 (2005)

Downloads: (external link)
http://arxiv.org/pdf/cond-mat/0310503 Latest version (application/pdf)

Related works:
Journal Article: The scale-free topology of market investments (2005)
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:cond-mat/0310503

Access Statistics for this paper

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