Comparing the collective behavior of banking industry

TL;DR

This paper compares the collective behavior of banking sectors in four global stock markets using Random Matrix Theory, revealing that mature markets exhibit higher collective behavior and are more vulnerable to perturbations.

Contribution

It applies RMT tools to analyze banking sectors across markets, providing new insights into their collective dynamics and vulnerability differences.

Findings

Mature markets show higher collective behavior.

NPR indicates independent banks within markets.

Mature markets are more sensitive to perturbations.

Abstract

One of the most important features of capital markets as an adaptive complex networks is their collective behavior. In this paper, we have analyzed the banking sectors of 4 world stock markets,which composed of emerging and matures ones. By applying one the important complexity notions, Random matrix theory(RMT), it is founded that mature markets have a higher degree of collective behavior,Even though we used RMT tools: participation ratio(PR), node participation ratio(NPR)and relative participation ratio(RPR) , which NPR illustrated independent banks than whole market and RPR compared collective behavior of markets by a normal range. By applying local and global perturbations, we concluded that mature markets are more vulnerable to perturbations due to the high level of collective behavior. Finally, by drawing the dendrograms and heat maps of the correlation matrices,