|
|
|
Hierarchical cluster-tendency analysis of the group structure in the foreign exchange market |
Xin-Ye Wu, Zhi-Gang Zheng( ) |
| Department of Physics and the Beijing–Hong Kong–Singapore Joint Center for Nonlinear and Complex Systems, Beijing Normal University, Beijing 100875, China |
|
|
|
|
Abstract A hierarchical cluster-tendency (HCT) method in analyzing the group structure of networks of the global foreign exchange (FX) market is proposed by combining the advantages of both the minimal spanning tree (MST) and the hierarchical tree (HT). Fifty currencies of the top 50 World GDP in 2010 according to World Bank’s database are chosen as the underlying system. By using the HCT method, all nodes in the FX market network can be “colored” and distinguished. We reveal that the FX networks can be divided into two groups, iffe., the Asia-Pacific group and the Pan-European group. The results given by the hierarchical cluster-tendency method agree well with the formerly observed geographical aggregation behavior in the FX market. Moreover, an oil-resource aggregation phenomenon is discovered by using our method. We find that gold could be a better numeraire for the weekly-frequency FX data.
|
| Keywords
foreign-exchange market
hierarchical cluster-tendency method
hierarchical tree
minimum spanning tree
|
|
Corresponding Author(s):
Zheng Zhi-Gang,Email:zgzheng@bnu.edu.cn
|
|
Issue Date: 01 August 2013
|
|
| 1 |
R. N. Mantegna, Hierarchical structure in financial markets, Eur. Phys. J. B , 1999, 11(1): 193
doi: 10.1007/s100510050929
|
| 2 |
D. M. Song, Z. Q. Jiang, and W. X. Zhou, Statistical properties of world investment networks, Physica A , 2009, 388(12): 2450
doi: 10.1016/j.physa.2009.03.004
|
| 3 |
S. Lee, M. J. Kim, S. Y. Lee, S. Y. Kim, and J. H. Ban, The effect of the subprime crisis on the credit risk in global scale, Physica A , 2013, 392(9): 2060
doi: 10.1016/j.physa.2012.12.027
|
| 4 |
S. Ahn, J. Choi, G. Lim, K. Y. Cha, S. Kim, and K. Kim, Identifying the structure of group correlation in the Korean financial market, Physica A , 2011, 390(11): 1991
doi: 10.1016/j.physa.2010.12.027
|
| 5 |
S. Y. Lee, D. I. Hwang, M. J. Kim, I. G. Koh, and S. Y. Kim, Cross-correlations in volume space: Differences between buy and sell volumes, Physica A , 2011, 390(5): 837
doi: 10.1016/j.physa.2010.11.012
|
| 6 |
W. S. Jung, S. Chae, J. S. Yang, and H. T. Moon, Characteristics of the Korean stock market correlations, Physica A , 2006, 361(1): 263
doi: 10.1016/j.physa.2005.06.081
|
| 7 |
A. Garas and P. Argyrakis, Correlation study of the Athens stock exchange, Physica A , 2007, 380: 399
doi: 10.1016/j.physa.2007.02.097
|
| 8 |
P. Caraiani, Characterizing emerging European stock markets through complex networks: From local properties to self-similar characteristics, Physica A , 2012, 391(13): 3629
doi: 10.1016/j.physa.2012.02.008
|
| 9 |
T. Heimo, G. Tibély, J. Saram?ki, K. Kaski, and J. Kertész, Spectral methods and cluster structure in correlation-based networks, Physica A , 2008, 387(23): 5930
doi: 10.1016/j.physa.2008.06.028
|
| 10 |
S. Battiston, Inner structure of capital control networks, Physica A , 2004, 338(1–2): 107
doi: 10.1016/j.physa.2004.02.031
|
| 11 |
M. A. Djauhari, A robust filter in stock networks analysis, Physica A , 2012, 391(20): 5049
doi: 10.1016/j.physa.2012.05.060
|
| 12 |
T. Heimo, J. Saram?ki, J. P. Onnela, and K. Kaski, Spectral and network methods in the analysis of correlation matrices of stock returns, Physica A , 2007, 383(1): 147
doi: 10.1016/j.physa.2007.04.124
|
| 13 |
G. Tibély, J. P. Onnela, J. Saram?ki, K. Kaski, and J. Kertész, Spectrum, intensity and coherence in weighted networks of a financial market, Physica A , 2006, 370(1): 145
doi: 10.1016/j.physa.2006.04.042
|
| 14 |
B. M. Tabak, T. R. Serra, and D. O. Cajueiro, Topological properties of stock market networks: The case of Brazil, Physica A , 2010, 389(16): 3240
doi: 10.1016/j.physa.2010.04.002
|
| 15 |
G. Bonanno, G. Caldarelli, F. Lillo, S. Micciche, N. Vandewalle, and R. N. Mantegna, Networks of equities in financial markets, Eur. Phys. J. B , 2001, 38: 363
doi: 10.1140/epjb/e2004-00129-6
|
| 16 |
L. Sandoval Jr, Pruning a minimum spanning tree, Physica A , 2012, 391(8): 2678
|
| 17 |
W. J. Ma, C. K. Hu, and R. E. Amritkar, Stochastic dynamical model for stock-stock correlations, Phys. Rev. E , 2004, 70(2): 026101
|
| 18 |
J. P. Onnela, A. Chakraborti, K. Kaski, and J. Kertész, Dynamic asset trees and Black Monday, Physica A , 2003, 324(1–2): 247
|
| 19 |
J. P. Onnela, A. Chakraborti, K. Kaski, J. Kertész, and A. Kanto, Dynamics of market correlations: Taxonomy and portfolio analysis, Phys. Rev. E , 2003, 68(5): 056110
|
| 20 |
J. P. Onnela, A. Chakraborti, K. Kaski, J. Kertesz, and A. Kanto, Asset trees and asset graphs in financial markets, Phys. Scr. , 2003, T106(1): 48
|
| 21 |
G. Bonnanno, G. Caldarelli, F. Lillo, and R. N. Mantegna, Topology of correlation-based minimal spanning trees in real and model markets, Phys. Rev. E , 2003, 68(4): 046130
|
| 22 |
M. H. Jensen, A. Johansen, F. Petroni, and I. Simonsen, Inverse statistics in the foreign exchange market, Physica A , 2004, 340(4): 678
|
| 23 |
M. McDonald, O. Suleman, S. Williams, S. Howison, and N. F. Johnson, Impact of unexpected events, shocking news and rumours on foreign exchange market dynamics, Phys. Rev. E , 2008, 77(4): 046110
|
| 24 |
M. McDonald, O. Suleman, S. Williams, S. Howison, and N. F. Johnson, Detecting a currency’s dominance or dependence using foreign exchange network trees, Phys. Rev. E , 2005, 72(4): 046106
|
| 25 |
S. Drozdz, J. Kwapien, P. Oswiecimka, and R. Rak, The foreign exchange market: return distributions, multifractality, anomalous multifractality and the Epps effect, New J. Phys. , 2010, 12(10): 105003
|
| 26 |
W. Jang, J. Lee, and W. Chang, Currency crises and the evolution of foreign exchange market evidence from minimum spanning tree, Physica A , 2011, 390(4): 707
|
| 27 |
M. Keskin, B. Deviren, and Y. Kocakaplan, Topology of the correlation networks among major currencies using hierarchical structure methods, Physica A , 2011, 390(4): 719
|
| 28 |
G. J. Wang, C. Xie, F. Han, and B. Sun, Similarity measure and topology evolution of foreign exchange markets using dynamic time warping method: Evidence from minimal spanning tree, Physica A , 2012, 391(16): 4136
|
| 29 |
J. Kwapien, S. Gworek, S. Drozdz, and A. Gorski, Analysis of a network structure of the foreign currency exchange market, J. Econ. Interact. Coord , 2009, 4(1): 55
doi: 10.1007/s11403-009-0047-9
|
| 30 |
R. N. Mantegna and H. Eugene Stanley, An Introduction to Econophysics: Correlations and Complexity in Finance, Cambridge: Cambridge University Press , 2010
pmid:PMC3004792
|
| 31 |
E. Kantar, B. Deviren, and M. Keskin, Hierarchical structure of Turkey’s foreign trade, Physica A , 2011, 390(20): 3454
doi: 10.1016/j.physa.2011.05.004
|
| 32 |
Y. Kocakaplan, B. Deviren, and M. Keskin, Hierarchical structures of correlations networks among Turkey’s exports and imports by currencies, Physica A , 2012, 391(24): 6509
doi: 10.1016/j.physa.2012.07.021
|
| 33 |
http://data.WorldBank.org/
|
| 34 |
http://www.oanda.com/currency/historical-rates/
|
| 35 |
M. J. Naylora, L. C. Rose, and B. J. Moyle, Topology of foreign exchange markets using hierarchical structure methods, Physica A , 2007, 382(1): 199
doi: 10.1016/j.physa.2007.02.019
|
| 36 |
R. Rammel, G. Toulouse, and M. A. Virasoro, Ultrametricity for physicists, Rev. Mod. Phys. , 1986, 58(3): 765
doi: 10.1103/RevModPhys.58.765
|
| 37 |
J. P. Onnela and M. Sc, Taxonomy of Financial Assets, Thesis, Helsinki University of Technology , 2002
|
| 38 |
D. M. Song, M. Tumminello, W. X. Zhou, and R. N. Mantegna, Evolution of worldwide stock markets, correlation structure, and correlation-based graphs, Phys. Rev. E , 2011, 84(2): 026108
doi: 10.1103/PhysRevE.84.026108 pmid:21929065
|
| 39 |
M. Eryi?it and R. Eryi?it, Network structure of crosscorrelations among the world market indices, Physica A , 2009, 388(17): 3551
doi: 10.1016/j.physa.2009.04.028
|
| 40 |
G. Bonanno, N. Vandewalle, and R. N. Mantegna, Taxonomy of stock market indices, Phys. Rev. E , 2000, 62(6): R7615
doi: 10.1103/PhysRevE.62.R7615 pmid:11138114
|
| 41 |
R. Coelho, C. G. Gilmore, B. Lucey, P. Richmond, and S. Hutzler, The evolution of interdependence in world equity markets – Evidence from minimum spanning trees, Physica A , 2007, 376: 455
doi: 10.1016/j.physa.2006.10.045
|
| 43 |
Y. Kocakaplan, S?an, B. Deviren, and M. Keskin, Correlations, hierarchies and networks of the world’s automotive companies, Physica A , 2013, 392(12): 2736
doi: 10.1016/j.physa.2013.02.013
|
|
Viewed |
|
|
|
Full text
|
|
|
|
|
Abstract
|
|
|
|
|
Cited |
|
|
|
|
| |
Shared |
|
|
|
|
| |
Discussed |
|
|
|
|
