Abstract
This paper studies the stability of stock network after crashes based on the entropy method. By measuring the network stability using the entropy calculated with the degree distribution, we find that the entropy of stock network is close to the ER and WS networks. We further introduce the government rescue policies as a natural experiment and apply the measurement of entropy to study the influence of rescue polices after crashes on the network stability, and find that rescue policies only have short-term influence. Analysis of relation between stock degrees and government purchasing behaviors further verifies the influences of rescue policies on the stock network stability.
Highlights
The stability of networks after random failures or attacks is a central issue in the study of complex networks [1,2,3,4,5,6,7]
We have studied the influence of government rescue policies on the stability of stock networks after crashes in the Shanghai and Hong Kong stock markets based on the entropy method
By analyzing the entropy of the stock network in different sub-periods, i.e., stable-state sub-periods and sub-periods with and without rescue policies after a crash, we find that rescue policies have only a short-term influence on the stability of the stock network after a crash, and can improve the network stability for only a short time
Summary
The stability of networks after random failures or attacks is a central issue in the study of complex networks [1,2,3,4,5,6,7]. A large amount of research has been devoted to this issue for various complex networks, such as biological, physical, social and financial networks, and has successfully revealed the relationship between network structure and stability after external attacks [8,9,10,11]. Studies on network stability elucidate the topological reconfigurations of stock networks after crashes and help to improve our understanding of financial crises. These studies cannot be directly used to guide the government in stabilizing the market after crashes
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