A Perspective on Correlation-Based Financial Networks and Entropy Measures

  title={A Perspective on Correlation-Based Financial Networks and Entropy Measures},
  author={Vishwas Kukreti and Hirdesh K. Pharasi and Priya Gupta and Sunil Kumar},
  booktitle={Frontiers in Physics},
In this mini-review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock prices fluctuate with time, showing interesting evolutionary patterns, especially during critical events such as market crashes, bubbles, etc. We show that the study of correlation-based networks and their evolution with time is useful for extracting important… Expand

Figures from this paper

Network-centric Indicators for Fragility in Global Financial Indices
Over the last 2 decades, financial systems have been studied and analyzed from the perspective of complex networks, where the nodes and edges in the network represent the various financial componentsExpand
An analysis of network filtering methods to sovereign bond yields during COVID-19
In this work, we investigate the impact of the COVID-19 pandemic on sovereign bond yields amongst European countries. We consider the temporal changes from financial correlations using networkExpand
Phase separation and scaling in correlation structures of financial markets
This work constructs a `phase space', where different market events (bubbles, crashes, etc.) undergo phase separation and display order-disorder transitions, and proposes a generic indicator that facilitates the continuous monitoring of the internal structure of the market. Expand


Relationship between Entropy and Dimension of Financial Correlation-Based Network
In some cases, the proposed analysis method can more accurately capture the structural differences of networks than the power law index commonly used in previous studies. Expand
Structural Entropy: Monitoring Correlation-Based Networks Over Time With Application To Financial Markets
A new measure, “Structural Entropy”, is proposed, which relies on the finer-grained network communities (in contrast to the network’s connected components), and takes into consideration both the number of communities and their sizes, generating a single representative value. Expand
Correlation, Hierarchies, and Networks in Financial Markets
How to define and obtain hierarchical trees, correlation based trees and networks from a correlation matrix, and a method to associate a hierarchically nested factor model to a hierarchical tree obtained from a correlated matrix are discussed. Expand
Networks of equities in financial markets
Abstract.We review the recent approach of correlation based networks of financial equities. We investigate portfolio of stocks at different time horizons, financial indices and volatility time seriesExpand
Dynamics of Stock Market Correlations
We present a novel approach to the study the dynamics of stock market correlations. This is achieved through an innovative visualization tool that allows an investigation of the structure andExpand
Correlations of stock price fluctuations under multi-scale and multi-threshold scenarios
This work decomposes the original stock price fluctuation series into different time scales, and combines the multi-scale method with themulti-threshold method to bring to light the implicit information of fully connected networks. Expand
Clustering and information in correlation based financial networks
Abstract.Networks of companies can be constructed by using return correlations. A crucial issue in this approach is to select the relevant correlations from the correlation matrix. In order to studyExpand
Dominating Clasp of the Financial Sector Revealed by Partial Correlation Analysis of the Stock Market
The empirical part of this study is performed on a specific financial system, namely the set of 300 highly capitalized stocks traded at the New York Stock Exchange, in the time period 2001–2003, and finds that stocks belonging to the financial sector are the most influential stocks affecting the correlation profile of the system. Expand
Dynamics of cluster structure in financial correlation matrix
Abstract The correlation dimensions in the financial market are calculated and used as a measure to study the cluster structure in the correlation coefficient matrix. First, based on the existingExpand
Network Topologies of Financial Market During the Global Financial Crisis
We consider the effects of the global financial crisis through a local Korean financial market around the 2008 crisis. We analyze 185 individual stock prices belonging to the KOSPI (Korea CompositeExpand