What Form did Global Financial Integration Take from 1960 to 2015? A Topological Analysis

Bastidon, Cécile; Parent, Antoine

doi:10.2139/ssrn.2902547

Cited by 2 publications

(3 citation statements)

References 19 publications

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“…This highlights the opposition between the tree/star structure of the MST. The colors used on the nodes are derived from a hierarchical clustering using a complete linkage algorithm (as in [4]). We do not use this clustering for interpretation in the present work, as it mostly shows that classes group together neighboring nodes in the MST, as expected.…”

Section: Visualisation Of Financial Networkmentioning

confidence: 99%

“…From this representation, it is possible to study, e.g., the correlation structure of stock return time series [5], the various time-scales in correlation and correlation-based graphs of worldwide stock markets [6], or even cointegration or Granger causality [7]. However, while the econophysics literature aims to quantify risk diversification in portfolio management over various periods of time, the objective in the present work is, as in [4], the assessment of international financial integration in a historical perspective. For that, a different point of view is adopted and most importantly a segmentation method that works globally over a long time span, will be needed.…”

Section: Related Work 1graph Representation Of Dependences Of Financi...mentioning

confidence: 99%

“…Still, assessing local stationarity directly on the sliding estimates of the covariance structure would result into a too stringent procedure requesting that correlations between all pairs of countries remain constant along time. Elaborating on ideas in [3,4], we propose to keep only a global description of the financial integration by using a timedependent graph representation of financial networks. Indeed, it was shown first in the seminal work [3] that correlations between financial markets can be studied by keeping only the Minimum Spanning Tree on the correlation distance matrix, because it contains a meaningful economic taxonomy of the markets.…”

Section: Introductionmentioning

confidence: 99%

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Graph-based era segmentation of international financial integration

Bastidon

Parent

Jensen

et al. 2020

Physica A: Statistical Mechanics and its Applications

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Assessing world-wide financial integration constitutes a recurrent challenge in macroeconometrics, often addressed by visual inspections searching for data patterns. Econophysics literature enables us to build complementary, data-driven measures of financial integration using graphs. The present contribution investigates the potential and interests of a novel 3-step approach that combines several state-of-the-art procedures to i) compute graph-based representations of the multivariate dependence structure of asset prices time series representing the financial states of 32 countries world-wide ; ii) compute time series of 5 graph-based indices that characterize the time evolution of the topologies of the graph; iii) segment these time evolutions in piece-wise constant eras, using an optimization framework constructed on a multivariate multi-norm total variation penalized functional. The method shows first that it is possible to find endogenous stable eras of world-wide financial integration. Then, our results suggest that the most relevant globalization eras would be based on the historical patterns of global capital flows, while the major regulatory events of the 1970s would only appear as a cause of sub-segmentation.

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Section: Visualisation Of Financial Networkmentioning

confidence: 99%