The Spread of the Credit Crisis: View from a Stock Correlation Network

Smith, Reginald (2008): The Spread of the Credit Crisis: View from a Stock Correlation Network. Published in: Journal of the Korean Physical Society , Vol. 54, No. June (No. 6) (15 June 2009): pp. 2460-2463.

Abstract

The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain markets, in this case the US equity markets, follow a cascade or epidemic flow like model along the correlations of various stocks. A few images and explanation here will suffice to show the phenomenon. Also, whether the idea of "epidemic" or a "cascade" is a metaphor or model for this crisis will be discussed.

Animations of the spread of the crisis are available at http://reggiesmithsci.googlepages.com/creditcrisis

• Item Type: MPRA Paper
• Language: English
• Keywords: networks, econophysics, equities, stock market, correlation, credit crisis
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G10 - General

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