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

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.

Keywords: networks, econophysics, equities, stock market, correlation, credit crisis

JEL Classification: G10, G15

Suggested Citation

Smith, Reginald, The Spread of the Credit Crisis: View from a Stock Correlation Network (February 23, 2009). Journal of the Korean Physical Society, Vol. 54, No. 6, p. 2460-2463 (2009), Available at SSRN: https://ssrn.com/abstract=1325803

Reginald Smith (Contact Author)

Supreme Vinegar LLC ( email )

3430 Progress Dr.
Suite D
Bensalem, PA 19020

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