The Spread of the Credit Crisis: View from a Stock Correlation Network
Journal of the Korean Physical Society, Vol. 54, No. 6, p. 2460-2463 (2009)
8 Pages Posted: 10 Jan 2009 Last revised: 9 Jun 2009
Date Written: February 23, 2009
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.
Keywords: networks, econophysics, equities, stock market, correlation, credit crisis
JEL Classification: G10, G15
Suggested Citation: Suggested Citation