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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title The scale-free topology of market investments
Organization Unit
Authors
  • Stefano Battiston
  • Diego Garlaschelli
  • Maurizio Castri
  • Vito D P Servedio
  • Guido Caldarelli
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Physica A: Statistical Mechanics and its Applications
Publisher Elsevier
Geographical Reach international
ISSN 0378-4371
Volume 350
Number 2
Page Range 491 - 499
Date 2005
Abstract Text We propose a network description of large market investments, where both stocks and shareholders are represented as vertices connected by weighted links corresponding to shareholdings. In this framework, the in-degree ($k_{in}$) and the sum of incoming link weights (v) of an investor correspond to the number of assets held (portfolio diversification) and to the invested wealth (portfolio volume), respectively. An empirical analysis of three different real markets reveals that the distributions of both $k_{in}$ and v display power-law tails with exponents y and a. Moreover, we find that $k_{in}$ scales as a power-law function of v with an exponent b. Remarkably, despite the values of a, b and y differ across the three markets, they are always governed by the scaling relation b = (1-a)/(1-y). We show that these empirical findings can be reproduced by a recent model relating the emergence of scale-free networks to an underlying Paretian distribution of ‘hidden’ vertex properties.
Digital Object Identifier 10.1016/j.physa.2004.11.040
Other Identification Number merlin-id:10155
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