27 research outputs found
A Note on institutional hierarchy and volatility in financial markets
From a statistical point of view, the prevalence of non-Gaussian distributions in nancial returns and their volatilities shows that the Central Limit Theorem (CLT) often does not apply in nancial markets. In this paper we take the position that the independence assumption of the CLT is violated by herding tendencies among market participants, and investigate whether a generic probabilistic herding model can reproduce non-Gaussian statistics in systems with a large number of agents. It is well-known that the presence of a herding mechanism in the model is not sucient for non-Gaussian properties, which crucially depend on the details of the communication network among agents. The main contribution of this paper is to show that certain hierarchical networks, which portray the institutional structure of fund investment, warrant non-Gaussian properties for any system size and even lead to an increase in system-wide volatility. Viewed from this perspective, the mere existence of nancial institutions with socially interacting managers contributes considerably to nancial volatility.Herding; financial volatility; networks; core-perifery
Networks in Financial Markets
The thesis applies methods from network sciences to four economic topics: herding in financial markets; corporate board networks; contagion in global financial markets; the Italian overnight loan market
A Note on institutional hierarchy and volatility in financial markets
From a statistical point of view, the prevalence of non-Gaussian
distributions in nancial returns and their volatilities shows that the
Central Limit Theorem (CLT) often does not apply in nancial markets.
In this paper we take the position that the independence assumption
of the CLT is violated by herding tendencies among market
participants, and investigate whether a generic probabilistic herding
model can reproduce non-Gaussian statistics in systems with a large
number of agents. It is well-known that the presence of a herding mechanism
in the model is not sucient for non-Gaussian properties, which
crucially depend on the details of the communication network among
agents. The main contribution of this paper is to show that certain
hierarchical networks, which portray the institutional structure of fund
investment, warrant non-Gaussian properties for any system size and
even lead to an increase in system-wide volatility. Viewed from this
perspective, the mere existence of nancial institutions with socially
interacting managers contributes considerably to nancial volatility
Evolvement of Uniformity and Volatility in the Stressed Global Financial Village
Background: In the current era of strong worldwide market couplings the global financial village became highly prone to
systemic collapses, events that can rapidly sweep throughout the entire village.
Methodology/Principal Findings: We present a new methodology to assess and quantify inter-market relations. The
approach is based on the correlations between the market index, the index volatility, the market Index Cohesive Force and
the meta-correlations (correlations between the intra-correlations.) We investigated the relations between six important
world markets—U.S., U.K., Germany, Japan, China and India—from January 2000 until December 2010. We found that while
the developed ‘‘western’’ markets (U.S., U.K., Germany) are highly correlated, the interdependencies between these markets
and the developing ‘‘eastern’’ markets (India and China) are volatile and with noticeable maxima at times of global world
events. The Japanese market switches ‘‘identity’’—it switches between periods of high meta-correlations with the ‘‘western’’
markets and periods when it behaves more similarly to the ‘‘eastern’’ markets.
Conclusions/Significance: The methodological framework presented here provides a way to quantify the evolvement of
interdependencies in the global market, evaluate a world financial network and quantify changes in the world inter market
relations. Such changes can be used as precursors to the agitation of the global financial village. Hence, the new approach
can help to develop a sensitive ‘‘financial seismograph’’ to detect early signs of global financial crises so they can be treated
before they develop into worldwide event
Interdependencies of female board member appointments
We investigate the networks of Japanese corporate boards and its influence on
the appointments of female board members. We find that corporate boards with
women show homophily with respect to gender. The corresponding firms often have
above average profitability. We also find that new appointments of women are
more likely at boards which observe female board members at other firms to
which they are tied by either ownership relations or corporate board
interlocks