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http://dx.doi.org/10.7737/JKORMS.2013.38.4.011

Investigating the Global Financial Markets from a Social Network Analysis Perspective  

Kim, Dae-Sik (Graduate School of Business IT, Kookmin University.Korea Investment Management Co., Ltd.)
Kwahk, Kee-Young (College of Business Administration, School of Management Information Systems, Kookmin University)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.38, no.4, 2013 , pp. 11-33 More about this Journal
Abstract
We analyzed the structures and properties of the global financial market networks using social network analysis approach. The Minimum Spanning Tree (MST) lengths and networks of the global financial markets based on the correlation coefficients have been analyzed. Firstly, similar to the previous studies on the global stock indices using MST length, the diversification effects in the global multi-asset portfolio can disappear during the crisis as the correlations among the asset class and within the asset class increase due to the system risks. Second, through the network visualization, we found the clustering of the asset class in the global financial markets network, which confirms the possible diversification effect in the global multi-asset portfolio. Meanwhile, we found the changes in the structure of the network during the crisis. For the last one, in terms of the degree centrality, the stock indices were the most influential to other assets in the global financial markets network, while in terms of the betweenness centrality, Gold, Silver and AUD. In the practical perspective, we propose the methods such as MST length and network visualization to monitor the change of the correlation risk for the risk management of the multi-asset portfolio.
Keywords
Social Network Analysis; Global Financial Market; Minimum Spanning Tree; Diversification Effect; Centrality; Global Multi-Asset Portfolio;
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