Abstract
This paper deals with an analysis of correlation structure among stocks traded in Kuala Lumpur Stock Exchange (KLSE) by using network analysis approach. The minimum spanning tree (MST) related to that correlation structure will be presented to have a better understanding about stocks topological network. An overall centrality measure will be introduced to filter the economic information contained in the MST. This measure will give additional economic information that cannot be delivered by the conventional centrality measures such as degree centrality, betweenness centrality, closeness centrality and eigenvector centrality.
Highlights
Stock market regards as a complex system of economic transactions for the trading of company stocks and derivatives at an agree price
The network studied in this paper represents the set of stocks traded in Kuala Lumpur Stock Exchange (KLSE)
By using Kruskal’s algorithm provided in Matlab 7.8.0 (R2009a), we obtain a minimal spanning tree (MST) of 90 stocks listed in KLSE
Summary
Stock market regards as a complex system of economic transactions for the trading of company stocks and derivatives at an agree price. The researchers from diverse disciplines including mathematics and theoretical physics are showing a great interest in analyzing stock market system. They are interested in the behaviour of stocks traded in the market, i.e., the way the stocks relate to each other. The relation among stocks is customarily represented by the correlations among the logarithm of their stock returns. The correlation structure, together with the corresponding stocks, constitutes a complex system in the form of a network or, equivalently, an undirected weighted complete graph with finite number of nodes
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