Testing for Network and Spatial Autocorrelation

Testing for dependence has been a well-established component of spatial statistical analyses for decades. In particular, several popular test statistics have desirable properties for testing for the presence of spatial autocorrelation in continuous variables. In this paper we propose two contributions to the literature on tests for autocorrelation. First, we propose a new test for autocorrelation in categorical variables. While some methods currently exist for assessing spatial autocorrelation in categorical variables, the most popular method is unwieldy, somewhat ad hoc, and fails to provide grounds for a single omnibus test. Second, we discuss the importance of testing for autocorrelation in data sampled from the nodes of a network, motivated by social network applications. We demonstrate that our proposed statistic for categorical variables can both be used in the spatial and network setting

Testing for Network and Spatial Autocorrelation

Testing for dependence has been a well-established component of spatial statistical analyses for decades. In particular, several popular test statistics have desirable properties for testing for the presence of spatial autocorrelation in continuous variables. In this paper we propose two contributions to the literature on tests for autocorrelation. First, we propose a new test for autocorrelation in categorical variables. While some methods currently exist for assessing spatial autocorrelation in categorical variables, the most popular method is unwieldy, somewhat ad hoc, and fails to provide grounds for a single omnibus test. Second, we discuss the importance of testing for autocorrelation in network, rather than spatial, data, motivated by applications in social network data. We demonstrate that existing tests for autocorrelation in spatial data for continuous variables and our new test for categorical variables can both be used in the network setting

Why is order flow so persistent?

Order flow in equity markets is remarkably persistent in the sense that order signs (to buy or sell) are positively autocorrelated out to time lags of tens of thousands of orders, corresponding to many days. Two possible explanations are herding, corresponding to positive correlation in the behavior of different investors, or order splitting, corresponding to positive autocorrelation in the behavior of single investors. We investigate this using order flow data from the London Stock Exchange for which we have membership identifiers. By formulating models for herding and order splitting, as well as models for brokerage choice, we are able to overcome the distortion introduced by brokerage. On timescales of less than a few hours the persistence of order flow is overwhelmingly due to splitting rather than herding. We also study the properties of brokerage order flow and show that it is remarkably consistent both cross-sectionally and longitudinally.Comment: 42 pages, 15 figure

Kantian fractionalization predicts the conflict propensity of the international system

The study of complex social and political phenomena with the perspective and methods of network science has proven fruitful in a variety of areas, including applications in political science and more narrowly the field of international relations. We propose a new line of research in the study of international conflict by showing that the multiplex fractionalization of the international system (which we label Kantian fractionalization) is a powerful predictor of the propensity for violent interstate conflict, a key indicator of the system's stability. In so doing, we also demonstrate the first use of multislice modularity for community detection in a multiplex network application. Even after controlling for established system-level conflict indicators, we find that Kantian fractionalization contributes more to model fit for violent interstate conflict than previously established measures. Moreover, evaluating the influence of each of the constituent networks shows that joint democracy plays little, if any, role in predicting system stability, thus challenging a major empirical finding of the international relations literature. Lastly, a series of Granger causal tests shows that the temporal variability of Kantian fractionalization is consistent with a causal relationship with the prevalence of conflict in the international system. This causal relationship has real-world policy implications as changes in Kantian fractionalization could serve as an early warning sign of international instability.Comment: 17 pages + 17 pages designed as supplementary online materia