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A statistical analysis of UK financial networks

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Abstract

In recent years, with a growing interest in big or large datasets, there has been a rise in the application of large graphs and networks to financial big data. Much of this research has focused on the construction and analysis of the network structure of stock markets, based on the relationships between stock prices. Motivated by Boginski et al. (2005), who studied the characteristics of a network structure of the US stock market, we construct network graphs of the UK stock market using same method. We fit four distributions to the degree density of the vertices from these graphs, the Pareto I, Fréchet, lognormal, and generalised Pareto distributions, and assess the goodness of fit. Our results show that the degree density of the complements of the market graphs, constructed using a negative threshold value close to zero, can be fitted well with the Fréchet and lognormal distributions.

Original languageEnglish
Pages (from-to)445-459
Number of pages15
JournalPhysica A: Statistical Mechanics and its Applications
Volume471
Early online date26 Dec 2016
DOIs
Publication statusPublished - 1 Apr 2017

Keywords

  • Degree density
  • Fréchet distribution
  • Lognormal distribution
  • Pareto distribution

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