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arxiv: cond-mat/0212037 · v1 · submitted 2002-12-02 · ❄️ cond-mat.stat-mech · physics.soc-ph

Dynamic asset trees and Black Monday

classification ❄️ cond-mat.stat-mech physics.soc-ph
keywords treeassetblacklengthmondaystockappropriatelycalled
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The minimum spanning tree, based on the concept of ultrametricity, is constructed from the correlation matrix of stock returns. The dynamics of this asset tree can be characterised by its normalised length and the mean occupation layer, as measured from an appropriately chosen centre called the `central node'. We show how the tree length shrinks during a stock market crisis, Black Monday in this case, and how a strong reconfiguration takes place, resulting in topological shrinking of the tree.

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