The scale-free topology of market investments
By Diego Garlaschelli, Stefano Battiston, M. Castri, V. Servedio, Guido Caldarelli. 2003
192 citations recorded by the source corpus.
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 (kin) and the sum of incoming link weights (v) of an investor correspond to the number of assets held (portfolio diversification) and to the invested wealth (portfolio volume), respectively. An empirical analysis of three different real markets reveals that the distributions of both kin and v display power-law tails with exponents γ and α. Moreover, we find that kin scales as a power-law function of v with an exponent β. Remarkably, despite the values of α, β and γ differ across the three markets, they are always governed by the scaling relation β=(1-α)/(1-γ). 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.
Subfields: Condensed Matter Physics, Economics and Econometrics, Statistical and Nonlinear Physics
View Paper: https://www.semanticscholar.org/paper/cff93474f024cf507719712d69791404fb785832
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In Economics and Econometrics
In Statistical and Nonlinear Physics
- Osvaldo Novaes de Oliveira Jr.
- Luciano da Fontoura Costa
- Luis Enrique Correa Rocha
- P. R. Villas Boas
- Francisco Aparecido Rodrigues
- Matheus Palhares Viana
- Gonzalo Travieso
- Lucas Antiqueira
Citations in the corpus
- Analyzing and modeling real-world phenomena with complex networks: a survey of applications (2007, background): “[157] studied shareholders of stocks traded in the NYSE, in the Italian sto ck market and in the NASDAQ (National Association of Securities Dealers).”
- The Political Economy of Global Finance: A Network Model (2013, background): “For financial system applications, see Tse, Liu, and Lau 2010; Schweitzer et al. 2009; Battiston, Rodrigues, and Zeytinoglu 2007; Garlaschelli et al. 2005; Caldarelli et al. 2004; Shiller 2003; Sornette 2003.”