Dynamics of Investor Spanning Trees Around Dot-Com Bubble
Sindhuja Ranganathan, Mikko Kivel\"a, Juho Kanniainen

TL;DR
This paper investigates how investor networks, especially households, change during the dot-com bubble using correlation-based spanning trees, revealing that household investor networks pre-reacted to the bubble burst.
Contribution
It introduces a method to analyze temporal investor networks using spanning trees and compares behaviors across different investor types during a financial bubble.
Findings
Household investor networks reflected bubble buildup and burst in spanning tree measures.
Minimal and maximal spanning trees of households pre-reacted to the bubble burst.
Non-financial and financial institutions showed less clear network reactions.
Abstract
We identify temporal investor networks for Nokia stock by constructing networks from correlations between investor-specific net-volumes and analyze changes in the networks around dot-com bubble. We conduct the analysis separately for households, non-financial institutions, and financial institutions. Our results indicate that spanning tree measures for households reflected the boom and crisis: the maximum spanning tree measures had clear upward tendency in the bull markets when the bubble was building up, and, even more importantly, the minimum spanning tree measures pre-reacted the burst of bubble. At the same time, we find less clear reactions in minimal and maximal spanning trees of non-financial and financial institutions around the bubble, which suggest that household investors can have a greater herding tendency around bubbles.
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Taxonomy
TopicsComplex Systems and Time Series Analysis · Economic theories and models
