Time dependent cross correlations between different stock returns: A directed network of influence

Abstract

We study the time dependent cross correlations of stock returns, i.e. we measure the correlation as the function of the time shift between pairs of stock return time series using tick-by-tick data. We find a weak but significant effect showing that in many cases the maximum correlation is at nonzero time shift indicating directions of influence between the companies. Due to the weakness of the effect and the shortness of the characteristic time (in the order of a few minutes) the effect is compatible with market efficiency. The interaction of companies defines a directed network of influence.

7 pages, 4 figures, revtex4 style; added 5 more references

References in corpus (1)

• The domino effect for markets

Cited by in corpus (35)

• Networks of equities in financial markets
• Dynamic asset trees and Black Monday
• Correlation Networks Among Currencies
• Common Scaling Patterns in Intertrade Times of U. S. Stocks
• Quantifying and Modeling Long-Range Cross-Correlations in Multiple Time Series with Applications to World Stock Indices
• Competition in Social Networks: Emergence of a Scale-free Leadership Structure and Collective Efficiency
• Granger Causality Stock Market Networks: Temporal Proximity and Preferential Attachment
• Detecting a Currency's Dominance or Dependence using Foreign Exchange Network Trees
• Increasing market efficiency: Evolution of cross-correlations of stock returns
• Structural and topological phase transitions on the German Stock Exchange
• Thermodynamic Bound on the Asymmetry of Cross-Correlations
• The Epps effect revisited
• Self-organized Boolean game on networks
• Time scales involved in market emergence
• Pruning a Minimum Spanning Tree
• Credit Default Swaps Drawup Networks: Too Tied To Be Stable?
• Dynamic structural and topological phase transitions on the Warsaw Stock Exchange: A phenomenological approach
• Influence network in Chinese stock market
• On the origin of the Epps effect
• Effects of time dependency and efficiency on information flow in financial markets
• A Copula Approach on the Dynamics of Statistical Dependencies in the US Stock Market
• Price Drops, Fluctuations, and Correlation in a Multi-Agent Model of Stock Markets
• Memory effect and multifractality of cross-correlations in financial markets
• Financial correlations at ultra-high frequency: theoretical models and empirical estimation
• Financial interaction networks inferred from traded volumes
• Boolean Game on Scale-free Networks
• A two-parameter random walk with approximate exponential probability distribution
• Complex Correlation Approach for High Frequency Financial Data
• A microscopic model of triangular arbitrage
• A 2D Levy-flight model for the complex dynamics of real-life financial markets
• Estimation of connectivity measures in gappy time series
• Local fluctuations of the signed traded volumes and the dependencies of demands: a copula analysis
• Empirical symptoms of catastrophic bifurcation transitions on financial markets: A phenomenological approach
• Location and portfolio selection problems: A unified framework
• Reachability and recoverability of sink nodes in growing acyclic directed networks