IJPAM: Volume 78, No. 5 (2012)

MALAYSIAN STOCK CORRELATION NETWORKS:
BULL MARKET AND BEAR MARKET BEHAVIORS

Lam Shi Xiang$^1$, Hishamuddin Zainuddin$^2$,
Mahendran Shitan$^3$, Isthrinayagy Krishnarajah$^4$
$^{1,2,3,4}$Institute for Mathematical Research (INSPEM)
Universiti Putra Malaysia
43400 UPM Serdang, Selangor, MALAYSIA
$^2$Department of Physics
Faculty of Science
Universiti Putra Malaysia
43400 UPM Serdang, Selangor, MALAYSIA
$^{3,4}$Department of Mathematics
Faculty of Science
Universiti Putra Malaysia
43400 UPM Serdang, Selangor, MALAYSIA


Abstract. In this paper, the Malaysian stock market is analyzed using network theory on 782 stocks traded between the period of Jan 2007 to Dec 2010. The correlation networks that capture the price fluctuation pattern during the up trend, and down trend market are constructed. These networks are then characterized with clustering coefficient, maximum size of component, assortativity and unbiased local assortativity. We then compare how these network properties vary with respect to edge density. It is shown that there are more edges among the stocks in the giant component of correlation network constructed from the bear market period, and the clustering coefficient is also higher than the network constructed from bull market period. Regardless of the market behavior, the stock correlation network can be mainly classified as disassortative network with disassortative hubs. However, at lower edge densities, the correlation network can becomes assortatively mixed with disassortative hubs.

Received: April 30, 2012

AMS Subject Classification: 91B02, 94C15

Key Words and Phrases: complex network, stock correlation networks, assortative mixing, unbiased local assortativity, clustering coefficient

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Source: International Journal of Pure and Applied Mathematics
ISSN printed version: 1311-8080
ISSN on-line version: 1314-3395
Year: 2012
Volume: 78
Issue: 5