Cluster fusion-fission dynamics in the Singapore stock exchange
In this paper, we investigate how the cross-correlations between stocks in the Singapore stock exchange (SGX) evolve over 2008 and 2009 within overlapping one-month time windows. In particular, we examine how these cross-correlations change before, during, and after the Sep–Oct 2008 Lehman Brothers...
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| 格式: | Journal Article |
| 语言: | English |
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2016
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| 在线阅读: | https://hdl.handle.net/10356/82803 http://hdl.handle.net/10220/40349 |
| _version_ | 1826119244479201280 |
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| author | Teh, Boon Kin Cheong, Siew Ann |
| author2 | School of Physical and Mathematical Sciences |
| author_facet | School of Physical and Mathematical Sciences Teh, Boon Kin Cheong, Siew Ann |
| author_sort | Teh, Boon Kin |
| collection | NTU |
| description | In this paper, we investigate how the cross-correlations between stocks in the Singapore stock exchange (SGX) evolve over 2008 and 2009 within overlapping one-month time windows. In particular, we examine how these cross-correlations change before, during, and after the Sep–Oct 2008 Lehman Brothers Crisis. To do this, we extend the complete-linkage hierarchical clustering algorithm, to obtain robust clusters of stocks with stronger intracluster correlations, and weaker intercluster correlations. After we identify the robust clusters in all time windows, we visualize how these change in the form of a fusion-fission diagram. Such a diagram depicts graphically how the cluster sizes evolve, the exchange of stocks between clusters, as well as how strongly the clusters mix. From the fusion-fission diagram, we see a giant cluster growing and disintegrating in the SGX, up till the Lehman Brothers Crisis in September 2008 and the market crashes of October 2008. After the Lehman Brothers Crisis, clusters in the SGX remain small for few months before giant clusters emerge once again. In the aftermath of the crisis, we also find strong mixing of component stocks between clusters. As a result, the correlation between initially strongly-correlated pairs of stocks decay exponentially with average life time of about a month. These observations impact strongly how portfolios and trading strategies should be formulated. |
| first_indexed | 2024-10-01T04:57:02Z |
| format | Journal Article |
| id | ntu-10356/82803 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T04:57:02Z |
| publishDate | 2016 |
| record_format | dspace |
| spelling | ntu-10356/828032023-02-28T19:30:37Z Cluster fusion-fission dynamics in the Singapore stock exchange Teh, Boon Kin Cheong, Siew Ann School of Physical and Mathematical Sciences Statistical and Nonlinear Physics In this paper, we investigate how the cross-correlations between stocks in the Singapore stock exchange (SGX) evolve over 2008 and 2009 within overlapping one-month time windows. In particular, we examine how these cross-correlations change before, during, and after the Sep–Oct 2008 Lehman Brothers Crisis. To do this, we extend the complete-linkage hierarchical clustering algorithm, to obtain robust clusters of stocks with stronger intracluster correlations, and weaker intercluster correlations. After we identify the robust clusters in all time windows, we visualize how these change in the form of a fusion-fission diagram. Such a diagram depicts graphically how the cluster sizes evolve, the exchange of stocks between clusters, as well as how strongly the clusters mix. From the fusion-fission diagram, we see a giant cluster growing and disintegrating in the SGX, up till the Lehman Brothers Crisis in September 2008 and the market crashes of October 2008. After the Lehman Brothers Crisis, clusters in the SGX remain small for few months before giant clusters emerge once again. In the aftermath of the crisis, we also find strong mixing of component stocks between clusters. As a result, the correlation between initially strongly-correlated pairs of stocks decay exponentially with average life time of about a month. These observations impact strongly how portfolios and trading strategies should be formulated. Accepted version 2016-03-31T06:27:11Z 2019-12-06T15:05:56Z 2016-03-31T06:27:11Z 2019-12-06T15:05:56Z 2015 Journal Article Teh, B. K., & Cheong, S. A. (2015). Cluster fusion-fission dynamics in the Singapore stock exchange. The European Physical Journal B, 88(10), 263-. 1434-6028 https://hdl.handle.net/10356/82803 http://hdl.handle.net/10220/40349 10.1140/epjb/e2015-60456-y en The European Physical Journal B © 2015 EDP Sciences, Societa Italiana di Fisica. This is the author created version of a work that has been peer reviewed and accepted for publication in The European Physical Journal B, published by Springer-Verlag on behalf of EDP Sciences, Societa Italiana di Fisica. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1140/epjb/e2015-60456-y]. 17 p. application/pdf |
| spellingShingle | Statistical and Nonlinear Physics Teh, Boon Kin Cheong, Siew Ann Cluster fusion-fission dynamics in the Singapore stock exchange |
| title | Cluster fusion-fission dynamics in the Singapore stock exchange |
| title_full | Cluster fusion-fission dynamics in the Singapore stock exchange |
| title_fullStr | Cluster fusion-fission dynamics in the Singapore stock exchange |
| title_full_unstemmed | Cluster fusion-fission dynamics in the Singapore stock exchange |
| title_short | Cluster fusion-fission dynamics in the Singapore stock exchange |
| title_sort | cluster fusion fission dynamics in the singapore stock exchange |
| topic | Statistical and Nonlinear Physics |
| url | https://hdl.handle.net/10356/82803 http://hdl.handle.net/10220/40349 |
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