scholarly journals The Volatility Forecasting Power of Financial Network Analysis

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-17 ◽  
Author(s):  
Nicolás S. Magner ◽  
Jaime F. Lavin ◽  
Mauricio A. Valle ◽  
Nicolás Hardy
Keyword(s):  
Spanning Tree ◽  
Predictive Power ◽  
Minimum Spanning Tree ◽  
Financial Networks ◽  
Order Effects ◽  
Structural Factors ◽  
Financial Variables ◽  
Road Map ◽  
Daily Returns

This investigation connects two crucial economic and financial fields, financial networks, and forecasting. From the financial network’s perspective, it is possible to enhance forecasting tools, since econometrics does not incorporate into standard economic models, second-order effects, nonlinearities, and systemic structural factors. Using daily returns from July 2001 to September 2019, we used minimum spanning tree and planar maximally filtered graph techniques to forecast the stock market realized volatility of 26 countries. We test the predictive power of our core models versus forecasting benchmarks models in and out of the sample. Our results show that the length of the minimum spanning tree is relevant to forecast volatility in European and Asian stock markets, improving forecasting models’ performance. As a new contribution, the evidence from this work establishes a road map to deepening the understanding of how financial networks can improve the quality of prediction of financial variables, being the latter, a crucial factor during financial shocks, where uncertainty and volatility skyrocket.

scholarly journals Converting MST to TSP Path by Branch Elimination

2020 ◽  
Vol 11 (1) ◽  
pp. 177
Author(s):  
Pasi Fränti ◽  
Teemu Nenonen ◽  
Mingchuan Yuan
Keyword(s):  
Spanning Tree ◽  
Closed Loop ◽  
Minimum Spanning Tree ◽  
Travelling Salesman Problem ◽  
Open Loop ◽  
Travelling Salesman ◽  
Elimination Algorithm ◽  
Number Of Iterations ◽  
Number Of Branches

Travelling salesman problem (TSP) has been widely studied for the classical closed loop variant but less attention has been paid to the open loop variant. Open loop solution has property of being also a spanning tree, although not necessarily the minimum spanning tree (MST). In this paper, we present a simple branch elimination algorithm that removes the branches from MST by cutting one link and then reconnecting the resulting subtrees via selected leaf nodes. The number of iterations equals to the number of branches (b) in the MST. Typically, b << n where n is the number of nodes. With O-Mopsi and Dots datasets, the algorithm reaches gap of 1.69% and 0.61 %, respectively. The algorithm is suitable especially for educational purposes by showing the connection between MST and TSP, but it can also serve as a quick approximation for more complex metaheuristics whose efficiency relies on quality of the initial solution.

scholarly journals A Network Analysis of Shariah-Compliant Stocks across Global Financial Crisis: A Case of Malaysia

2019 ◽  
Vol 13 (7) ◽  
pp. 80 ◽  
Author(s):  
Fatin Nur Amirah Mahamood ◽  
Hafizah Bahaludin ◽  
Mimi Hafizah Abdullah
Keyword(s):  
Topological Structure ◽  
Spanning Tree ◽  
Minimum Spanning Tree ◽  
Global Financial Crisis ◽  
Closeness Centrality ◽  
Centrality Measures ◽  
Financial Networks ◽  
Eigenvector Centrality ◽  
Land Holdings ◽  
Year 2000

Financial network is a complex system in which transaction of securities take place. Due to its complexity, a minimum spanning tree (MST) technique is used to visualize the structure. This paper investigates the topological structure of 125 shariah-compliant stocks traded in Bursa Malaysia from the year 2000 until 2017. Financial networks of the shariah-compliant stocks are constructed using MST for three duration periods namely the pre-crisis, during crisis and post-crisis. To determine the important stocks in the networks, centrality measures are applied such as degree centrality, betweenness centrality, closeness centrality and eigenvector centrality. Lastly, overall centrality measures are computed to identify the overall characteristic of each node. The findings showed that, KUB Malaysia Berhad was the most influential stock in the pre-crisis and crisis periods. While, MK Land Holdings was the main stock in the post-crisis network.

scholarly journals Automatically Produced Algorithms for the Generalized Minimum Spanning Tree Problem

2016 ◽  
Vol 2016 ◽  
pp. 1-11 ◽  
Author(s):  
Carlos Contreras-Bolton ◽  
Carlos Rey ◽  
Sergio Ramos-Cossio ◽  
Claudio Rodríguez ◽  
Felipe Gatica ◽  
...  
Keyword(s):  
Spanning Tree ◽  
Minimum Spanning Tree ◽  
Undirected Graph ◽  
Minimum Cost ◽  
Practical Applications ◽  
Minimum Spanning Tree Problem ◽  
Generalized Minimum Spanning Tree ◽  
Np Hardness ◽  
New Algorithms

The generalized minimum spanning tree problem consists of finding a minimum cost spanning tree in an undirected graph for which the vertices are divided into clusters. Such spanning tree includes only one vertex from each cluster. Despite the diverse practical applications for this problem, the NP-hardness continues to be a computational challenge. Good quality solutions for some instances of the problem have been found by combining specific heuristics or by including them within a metaheuristic. However studied combinations correspond to a subset of all possible combinations. In this study a technique based on a genotype-phenotype genetic algorithm to automatically construct new algorithms for the problem, which contain combinations of heuristics, is presented. The produced algorithms are competitive in terms of the quality of the solution obtained. This emerges from the comparison of the performance with problem-specific heuristics and with metaheuristic approaches.

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