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SOE: Fachverband Physik sozio-ökonomischer Systeme
SOE 3: Poster
SOE 3.1: Poster
Montag, 17. März 2025, 17:30–19:30, P4
Causal Hierarchy in the Financial Market Network - Uncovered by the Helmholtz-Hodge-Kodaira Decomposition — •Tobias Wand1,2,3, Oliver Kamps1, and Hiroshi Iyetomi3,4 — 1CeNoS Münster — 2Institut für Theoretische Physik, Universität Münster — 3Faculty for Data Science, Rissho University, Kumagaya, Japan — 4Canon Institute for Global Studies, Tokyo, Japan
Granger causality can uncover the cause-and-effect relationships in financial networks. However, such networks can be convoluted and difficult to interpret, but the Helmholtz-Hodge-Kodaira decomposition can split them into rotational and gradient components which reveal the hierarchy of the Granger causality flow. Using Kenneth French's business sector return time series, it is revealed that during the COVID crisis, precious metals and pharmaceutical products were causal drivers of the financial network. Moreover, the estimated Granger causality network shows a high connectivity during the crisis, which means that the research presented here can be especially useful for understanding crises in the market better by revealing the dominant drivers of crisis dynamics.
This contribution is based on the publication Wand et al., Entropy 2024, 26(10), 858 and was supported by the JSPS Summer Program.
Keywords: Granger Causality; Helmholtz-Hodge Decomposition; Data Science; Finance; Econophysics