Investigating the Influence Relationship Models for Stocks in Indian Equity Market: A Weighted Network Modelling Study

• Published in: PloS one Vol. 11; no. 11; p. e0166087
• Main Authors: Bhattacharjee, Biplab, Shafi, Muhammad, Acharjee, Animesh
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 15.11.2016; Public Library of Science (PLoS)
• Subjects: Banking industry; Cement; Computer and Information Sciences; Construction; Construction industry; Economic models; Engineering - economics; Engineering and Technology; Filtration; Financial analysis; Financial institutions; Humans; Identification; India; International finance; Investigations; Investments; Marketing; Markets; Models, Economic; Models, Theoretical; Network analysis; People and Places; Petroleum - economics; Physical Sciences; Securities markets; Social Sciences; Sovereign debt; Statistical mechanics; Stock exchanges; Stocks; Studies; Systems stability; Technology - economics; Mumbai India; India
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0166087

The socio-economic systems today possess high levels of both interconnectedness and interdependencies, and such system-level relationships behave very dynamically. In such situations, it is all around perceived that influence is a perplexing power that has an overseeing part in affecting the dynamics and behaviours of involved ones. As a result of the force & direction of influence, the transformative change of one entity has a cogent aftereffect on the other entities in the system. The current study employs directed weighted networks for investigating the influential relationship patterns existent in a typical equity market as an outcome of inter-stock interactions happening at the market level, the sectorial level and the industrial level. The study dataset is derived from 335 constituent stocks of 'Standard & Poor Bombay Stock Exchange 500 index' and study period is 1st June 2005 to 30th June 2015. The study identifies the set of most dynamically influential stocks & their respective temporal pattern at three hierarchical levels: the complete equity market, different sectors, and constituting industry segments of those sectors. A detailed influence relationship analysis is performed for the sectorial level network of the construction sector, and it was found that stocks belonging to the cement industry possessed high influence within this sector. Also, the detailed network analysis of construction sector revealed that it follows scale-free characteristics and power law distribution. In the industry specific influence relationship analysis for cement industry, methods based on threshold filtering and minimum spanning tree were employed to derive a set of sub-graphs having temporally stable high-correlation structure over this ten years period.