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Complex network-based analysis of nonlinear dependencies in multidimensional financial time series

Haluszczynski, Alexander and Räth, Christoph and Kredler, Lukas (2017) Complex network-based analysis of nonlinear dependencies in multidimensional financial time series. DPG Frühjahrestagung, 20.-24. März 2017, Dresden.

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Abstract

Cross-correlation and mutual information based complex networks of the day-to-day returns of US S&P500 stocks between 1985 and 2015 have been constructed in order to investigate the mutual dependencies of the stocks and their nature. We show that both networks detect qualitative differences especially during (recent) turbulent market periods thus indicating strongly fluctuating interconnections between the stocks of different companies in changing economic environments. A measure for the strength of nonlinear dependencies has been derived using surrogate data and led to interesting observations during periods of financial market crisis. In contrast to the prevailing view that dependencies reduce mainly to linear correlations during crisis it turned out that (at least in the crisis after 2008) nonlinear effects are significantly increasing. Finally, we apply a Markowitz mean variance portfolio optimization and integrate the measure of nonlinear dependencies to scale the investment exposure. This leads to significant outperformance as compared to a fully invested portfolio.

Item URL in elib:https://elib.dlr.de/111637/
Document Type:Conference or Workshop Item (Speech)
Title:Complex network-based analysis of nonlinear dependencies in multidimensional financial time series
Authors:
AuthorsInstitution or Email of AuthorsAuthors ORCID iD
Haluszczynski, AlexanderLMUUNSPECIFIED
Räth, Christophdlr research group complex plasma, oberpfaffenhofenUNSPECIFIED
Kredler, Lukasrisklab GmbHUNSPECIFIED
Date:2017
Refereed publication:Yes
Open Access:Yes
Gold Open Access:No
In SCOPUS:No
In ISI Web of Science:No
Status:Published
Keywords:Zeitserienanalyse, Netzwerke, mutuelle Information, Aktienmärkte
Event Title:DPG Frühjahrestagung
Event Location:Dresden
Event Type:international Conference
Event Dates:20.-24. März 2017
Organizer:Deutsche Physikalische Gesellschaft
HGF - Research field:Aeronautics, Space and Transport
HGF - Program:Space
HGF - Program Themes:Research under Space Conditions
DLR - Research area:Raumfahrt
DLR - Program:R FR - Forschung unter Weltraumbedingungen
DLR - Research theme (Project):R - Komplexe Plasmen / Data analysis
Location: Oberpfaffenhofen
Institutes and Institutions:Institute of Materials Physics in Space > Research Group Complex Plasma
Deposited By: Räth, Christoph
Deposited On:03 Apr 2017 10:58
Last Modified:31 Jul 2019 20:08

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