Visualizing the clustering of financial networks and profitability of stocks

C. M. Chen, Y. F. Chang

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We propose an approach to visualize the clustering of financial networks and a long-term profitability of stocks using financial time series data, by combining several methods of quantitative analysis. For demonstration purposes, this method is applied to investigate the network of Dow Jones Industrial Average (DJIA). Based on the time series data of stock prices during 31 July 2007 to 18 July 2011, our classification method clusters the DJIA components into five groups according to their profitability and property. By comparing the time correlation in the adjusted close price of stocks within the same group, we show that our clustering method results in a better classification of DJIA components than the methods of industry clustering and hierarchical clustering. With this integrated method, we have constructed a two-dimensional map of the DJIA network for visualization, and have related the first and second coordinates of DJIA components in the map to, respectively, their long-term profitability and property. Our analyses show very strong correlations for the sectors of Energy, Basic Materials, Technology, Capital Goods and Consumer/Non-Cyclical, significant correlations for the sectors of Services and Financial and a poor correlation for the Healthcare sector.

Original languageEnglish
Article numbercnu019
Pages (from-to)303-318
Number of pages16
JournalJournal of Complex Networks
Volume3
Issue number2
DOIs
Publication statusPublished - 2015 Jan 1

Fingerprint

Profitability
Clustering
Time series
Sector
Time Series Data
Demonstrations
Visualization
Financial Data
Financial Time Series
Stock Prices
Hierarchical Clustering
Quantitative Analysis
Clustering Methods
Healthcare
Chemical analysis
Financial networks
Industry
Energy

Keywords

  • Clustering
  • Financial networks
  • Stock profitability
  • Visualization

ASJC Scopus subject areas

  • Computer Networks and Communications
  • Management Science and Operations Research
  • Control and Optimization
  • Computational Mathematics
  • Applied Mathematics

Cite this

Visualizing the clustering of financial networks and profitability of stocks. / Chen, C. M.; Chang, Y. F.

In: Journal of Complex Networks, Vol. 3, No. 2, cnu019, 01.01.2015, p. 303-318.

Research output: Contribution to journalArticle

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