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Contagion in the World's Stock Exchanges Seen as a Set of Coupled Oscillators

Author

Listed:
  • Lucia Bellenzier

    (Department of Statistics and Quantitative Methods University of Milano-Bicocca - UNIMIB - Università degli Studi di Milano-Bicocca = University of Milano-Bicocca)

  • Jørgen Vitting Andersen

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)

  • Giulia Rotundo

    (UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome])

Abstract

We study how the phenomenon of contagion can take place in the network of the world's stock exchanges when each stock exchange acts as an integrate-and-fire oscillator. The characteristic non-linear price behavior of the integrate-and-fire oscillators is supported by empirical data and has a behavioral origin. One advantage of the integrate-and-fire dynamics is that it enables for a direct identification of cause and effect of price movements, without the need for statistical tests such as for example Granger causality tests often used in the identification of causes of contagion. Our methodology can thereby identify the most relevant nodes with respect to onset of contagion in the network of stock exchanges, as well as identify potential periods of high vulnerability of the network. The model is characterized by a separation of time scales created by a slow build up of stresses, for example due to (say monthly/yearly) macroeconomic factors, and then a fast (say hourly/daily) release of stresses through " price-quakes " of price movements across the worlds network of stock exchanges.

Suggested Citation

  • Lucia Bellenzier & Jørgen Vitting Andersen & Giulia Rotundo, 2016. "Contagion in the World's Stock Exchanges Seen as a Set of Coupled Oscillators," Post-Print hal-01215620, HAL.
    • Handle: RePEc:hal:journl:hal-01215620
    DOI: 10.1016/j.econmod.2016.07.002
    Note: View the original document on HAL open archive server: https://hal.science/hal-01215620
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    Cited by:

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    2. Naji Massad & Jørgen Vitting Andersen, 2019. "Defining an intrinsic "stickiness" parameter of stock price returns," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02385901, HAL.
    3. Naji Massad & Jørgen Vitting Andersen, 2017. "Three different ways synchronization can cause contagion in financial markets," Post-Print halshs-01673333, HAL.
    4. Naji Massad & Jørgen Vitting Andersen, 2019. "Defining an intrinsic "stickiness" parameter of stock price returns," Post-Print halshs-02385901, HAL.
    5. Cao, Guangxi & Xie, Wenhao, 2021. "The impact of the shutdown policy on the asymmetric interdependence structure and risk transmission of cryptocurrency and China’s financial market," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    6. Naji Massad & J{o}rgen Vitting Andersen, 2020. "Defining an intrinsic stickiness parameter of stock price returns," Papers 2005.02351, arXiv.org.
    7. Matteo Cinelli & Giovanna Ferraro & Antonio Iovanella & Giulia Rotundo, 2021. "Assessing the impact of incomplete information on the resilience of financial networks," Annals of Operations Research, Springer, vol. 299(1), pages 721-745, April.
    8. Massad, Naji & Andersen, Jørgen Vitting, 2020. "Defining an intrinsic “stickiness” parameter of stock price returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 547(C).

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