Dataset Information

Financial fluctuations anchored to economic fundamentals: A mesoscopic network approach.

ABSTRACT: We demonstrate the existence of an empirical linkage between nominal financial networks and the underlying economic fundamentals, across countries. We construct the nominal return correlation networks from daily data to encapsulate sector-level dynamics and infer the relative importance of the sectors in the nominal network through measures of centrality and clustering algorithms. Eigenvector centrality robustly identifies the backbone of the minimum spanning tree defined on the return networks as well as the primary cluster in the multidimensional scaling map. We show that the sectors that are relatively large in size, defined with three metrics, viz., market capitalization, revenue and number of employees, constitute the core of the return networks, whereas the periphery is mostly populated by relatively smaller sectors. Therefore, sector-level nominal return dynamics are anchored to the real size effect, which ultimately shapes the optimal portfolios for risk management. Our results are reasonably robust across 27 countries of varying degrees of prosperity and across periods of market turbulence (2008-09) as well as periods of relative calmness (2012-13 and 2015-16).

SUBMITTER: Sharma K

PROVIDER: S-EPMC5556004 | biostudies-literature | 2017 Aug

REPOSITORIES: biostudies-literature

ACCESS DATA

Publications

Financial fluctuations anchored to economic fundamentals: A mesoscopic network approach.

Sharma Kiran K Gopalakrishnan Balagopal B Chakrabarti Anindya S AS Chakraborti Anirban A

Scientific reports 20170814 1

We demonstrate the existence of an empirical linkage between nominal financial networks and the underlying economic fundamentals, across countries. We construct the nominal return correlation networks from daily data to encapsulate sector-level dynamics and infer the relative importance of the sectors in the nominal network through measures of centrality and clustering algorithms. Eigenvector centrality robustly identifies the backbone of the minimum spanning tree defined on the return networks ...[more]

PMID: 28808273

Similar Datasets

Project description:The highly regulated pH of cells and the less-regulated pH of the surrounding extracellular matrix (ECM) is the result of a delicate balance between metabolic processes and proton production, proton transportation, chemical buffering, and vascular removal of waste products. Malignant cells show a pronounced increase in metabolic processes where the 10- to 15-fold rise in glucose consumption is only the tip of the iceberg. Aerobic glycolysis (Warburg effect) is one of the hallmarks of cancer metabolism that implies excessive production of protons, which if stayed inside the cells would result in fatal intracellular acidosis (maintaining a strict acid-base balance is essential for the survival of eukaryotic cells). Malignant cells solve this problem by increasing mechanisms of proton transportation which expel the excess acidity. This allows cancer cells to keep a normal intracellular pH, or even overshooting this mechanism permits a slightly alkaline intracellular tendency. The proton excess expelled from malignant cells accumulates in the ECM, where chronic hypoxia and relative lack of enough blood vessels impede adequate proton clearance, thus creating an acidic microenvironment. This microenvironment is quite heterogeneous due to the tumor's metabolic heterogeneity and variable degrees of hypoxia inside the tumor mass. The acidic environment (plus other necessary cellular modifications) stimulates migration and invasion and finally intravasation of malignant cells which eventually may result in metastasis. Targeting tumor pH may go in two directions: 1) increasing extracellular pH which should result in less migration, invasion, and metastasis; and 2) decreasing intracellular pH which may result in acidic stress and apoptosis. Both objectives seem achievable at the present state of the art with repurposed drugs. This hypothesis analyzes the altered pH of tumors and its implications for progression and metastasis and also possible repurposed drug combinations targeting this vulnerable side of cancer development. It also analyzes the double-edged approach, which consists in pharmacologically increasing intracellular proton production and simultaneously decreasing proton extrusion creating intracellular acidity, acid stress, and eventual apoptosis.

Project description:Over the last decades, both advanced and emerging economies have experienced a striking increase in the intra-financial activity across different asset classes and increasingly complex contract types, leading to a far more complex financial system. Until the 2007-2008 crisis, the increased financial intensity and complexity was believed beneficial in making the financial system more resilient and less vulnerable to shocks. However, in 2007-2008, the advanced economies suffered the biggest financial crisis since the 1930s, followed by a severe post-crisis recession, questioning the adequacy of traditional tools in predicting, explaining, and responding to periods of financial distress. In particular, the effect of complex interconnections among financial actors on financial stability has been widely acknowledged. A recent debate focused on the effects of unconventional policies aimed at achieving both price and financial stability. Among these unconventional policies, Quantitative Easing (QE, i.e., the large-scale asset purchase programme conducted by a central bank upon the creation of new money) has been recently implemented by the European Central Bank (ECB). In this context, two questions deserve more attention in the literature. First, to what extent, the resources provided to the banking system through QE are transmitted to the real economy. Second, to what extent, the QE may also alter the pattern of intra-financial exposures and what are the implications in terms of financial stability. Here, we address these two questions by developing a methodology to map the multilayer macro-network of financial exposures among institutional sectors across financial instruments (i.e., loans and deposits, debt securities, and equity), and we illustrate our approach on recently available data. We then test the effect of the implementation of ECB's QE on the time evolution of the financial linkages in the multilayer macro-network of the euro area, as well as the effect on macroeconomic variables, such as consumption, investment, unemployment, growth, and inflation.

Dataset Information

Financial fluctuations anchored to economic fundamentals: A mesoscopic network approach.

Publications

Financial fluctuations anchored to economic fundamentals: A mesoscopic network approach.

Similar Datasets

OmicsDI is part of the ELIXIR infrastructure

Tweets