Its curvature foreshadows the next financial bubble
New paper sheds light on the higher-order architecture of financial systems and allow analysts to identify systemic risks like market bubbles or crashes
2021-03-22
(Press-News.org) An international team of interdisciplinary researchers has identified mathematical metrics to characterize the fragility of financial markets. Their paper "Network geometry and market instability" sheds light on the higher-order architecture of financial systems and allows analysts to identify systemic risks like market bubbles or crashes.
With the recent rush of small investors into so-called meme stocks and reemerging interest in cryptocurrencies talk of market instability, rising volatility, and bursting bubbles is surging. However, "traditional economic theories cannot foresee events like the US subprime mortgage collapse of 2007" according to study author Areejit Samal. He and his colleagues from more than ten mathematics, physics, economics, and complex systems focused institutions around the globe have made a great stride in characterizing stock market instability.
Their paper abstracts the complexity of the financial market into a network of stocks and employs geometry-inspired network measures to gauge market fragility and financial dynamics. They analyzed and contrasted the stock market networks for the USA S&P500 and the Japanese Nikkei-225 indices for a 32-year period (1985-2016) and for the first time were able to show that several discrete Ricci curvatures are excellent indicators of market instabilities. The work was recently published in the Royal Society Open Science journal and allows analysts to distinguish between 'business-as-usual' periods and times of fragility like bubbles or market crashes.
The network created by connecting stocks with highly correlated prices and trading volumes forms the structural basis of their work. The researchers then employ four discrete curvatures, developed by the director of Max Planck Institute for Mathematics in the Sciences Jürgen Jost and his coworkers, to study the changes in the structure of stock market networks over time. Their comparisons to other market stability metrics have shown that their four notions of curvature serve as generic indicators of market instability.
One curvature candidate, the Forman-Ricci curvature (FRE), has a particularly high correlation with traditional financial indicators and can accurately capture market fear (volatility) and fragility (risk). Their study confirms that in normal trading periods the market is very fragmented, whereas in times of bubbles and impending market crashes correlations between stocks become more uniform and highly interconnected. The FRE is sensitive to both sector-driven and global market fluctuations and whereas common indicators like the returns remain inconspicuous, network curvatures expose these dynamics and reach extreme values during a bubble. Thus, the FRE can capture the interdependencies within and between sectors that facilitate the spreading of perturbations and increase the danger of market crashes.
Max Planck Institute for Mathematics in the Sciences director Jürgen Jost summarizes the struggle of analyzing market fragility: "there are no easy definitions of a market crash or bubble and merely monitoring established market indices or log-returns does not suffice, but our methodology offers a powerful tool for continuously scanning market risk and thus the health of the financial system". The insights gained by this study can help decision-makers to better understand systemic risk and identify tipping points, which can potentially forecast coming financial crises or possibly even avoid them altogether.
INFORMATION:
Original publication
Samal A, Pharasi HK, Ramaia SJ, Kannan H, Saucan E, Jost J, Chakraborti A.
Network geometry and market instability.
R. Soc. Open Sci. 8: 201734.
https://doi.org/10.1098/rsos.201734
[Attachments] See images for this press release:
ELSE PRESS RELEASES FROM THIS DATE:
2021-03-22
Point
Epithelial cell rests of Malassez derived from the periodontal ligament were transformed into progenitor stem-like cells by stimulation with epigenetic agents.
Subsequently, the progenitor stem-like cells were directly differentiated into endothelial, mesenchymal stem, and osteogenic cells that constitute the periodontal ligament.
Background
Stem cells derived from the dental pulp or periodontal ligament have been used for regenerative dentistry. Although it is relatively easy to collect the dental pulp stem cells, it is difficult to obtain adequate numbers of good quality cells; a ...
2021-03-22
Using an improved version of the gene editing tool CRISPR/Cas9, researchers knocked out up to twelve genes in plants in a single blow. Until now, this had only been possible for single or small groups of genes. The approach was developed by researchers at Martin Luther University Halle-Wittenberg (MLU) and the Leibniz Institute of Plant Biochemistry (IPB). The method makes it easier to investigate the interaction of various genes. The study appeared in The Plant Journal.
The inheritance of traits in plants is rarely as simple and straightforward as Gregor Mendel described. The monk, whose experiments in the 19th century on trait inheritance in peas laid the foundation of genetics, in fact got lucky. "In the traits that ...
2021-03-22
Patricia Bernal, a Ramón y Cajal researcher at the Department of Microbiology of the University of Seville's Faculty of Biology, is working with the bacterium Pseudomonas putida, a biological control agent found in the soil and in plant roots and which, as such, has the ability to protect plants from pathogen attacks (organisms that cause diseases) also known as phytopathogens. Specifically, the US researcher is studying a molecular weapon that bacteria use (Type VI Secretion System or T6SS) to eliminate their competitors.
The T6SS could be compared to a harpoon with a poisonous tip that bacteria throw at their enemies to annihilate them. In a recent paper, which has just been published in the scientific journal PNAS and for ...
2021-03-22
Igor Stagljar made his career building molecular tools to combat cancer. But when the pandemic hit last March, he aimed his expertise at a new adversary, SARS-CoV-2.
Stagljar is a professor of biochemistry and molecular genetics in the Donnelly Centre for Cellular and Biomolecular Research at U of T's Temerty Faculty of Medicine. Last spring, with support from U of T's Toronto COVID-19 Action Fund, his team began developing a new method for measuring immunity to coronavirus in those who recovered from COVID-19.
They are now ready to reveal their creation -- a pinprick test that accurately measures ...
2021-03-22
"You have to win the battle against depression", "what counts is not surrendering" and "this is not a short road" are examples of conceptual metaphors typically used to describe experiences and issues associated with disorders like depression. Such expressions allude to abstract concepts but do so using familiar terms that enable better understanding of the experience. This kind of metaphor is often used unconsciously, going unnoticed by both speaker and listener. However, the study of metaphors can help access and understand the thinking, beliefs and feelings of individuals with mental disorders.
The conceptual metaphors of depression found in 23 blogs written by people with major depressive disorders were analysed by a multidisciplinary UOC team composed of Marta Coll-Florit and Salvador ...
2021-03-22
The results argue for a comprehensive approach to disease prevention. The scientists have now published their findings in the journal Nature Medicine.
Many elderly people suffer simultaneously from several, frequently very different diseases, a condition also known as multimorbidity. Their quality of life is severely restricted, and they receive medication from different doctors, a process which is difficult and often insufficiently coordinated. Observations indicate that certain diseases commonly occur together, but the causes of this are largely ...
2021-03-22
It's well known that mentoring opportunities are critical for development and career advancement, and are associated with greater job satisfaction and increased earnings and promotions.
Yet a recent study co-authored by RMIT University's Professor Andrew R. Timming found women may be missing out on these opportunities due to fears by male managers of potential misconduct allegations.
"Workplace relations between males and females have changed over the past two years. Male managers are significantly less likely than female managers to mentor or interact one-on-one with female employees," Timming said.
"We found that male managers were less likely to work one-on-one in an office with the door closed and less likely to have ...
2021-03-22
WASHINGTON, March 22, 2021 -- What's better at finding a hidden bomb -- a dog or an electronic chemical detector? In this episode, the Reactions team travels to the U.S. Naval Research Laboratory to find out: https://youtu.be/TRwqOFHOjac.
INFORMATION:
Reactions is a video series produced by the American Chemical Society and PBS Digital Studios. Subscribe to Reactions at http://bit.ly/ACSReactions and follow us on Twitter @ACSReactions.
The American Chemical Society (ACS) is a nonprofit organization chartered by the U.S. Congress. ACS' mission is to advance the broader ...
2021-03-22
March 22, 2021 (BRONX, NY)-- Most people with cancer who are infected by the novel coronavirus produce antibodies at a rate comparable to the rest of the population--but their ability to do so depends on their type of cancer and the treatments they've received, according to a new study by researchers at Montefiore Health System and Albert Einstein College of Medicine. The findings, published online today in Nature Cancer, may lead to better care for cancer patients, who face a heightened risk of dying from COVID-19, and suggests that cancer patients should ...
2021-03-22
PHILADELPHIA--Hormone drugs that reduce androgen levels may help disarm the coronavirus spike protein used to infect cells and stop the progression of severe COVID-19 disease, suggests a new preclinical study from researchers in the Abramson Cancer Center at the University of Pennsylvania and published online in Cell Press's iScience.
Researchers show how two receptors--known as ACE2 and TMPRSS2--are regulated by the androgen hormone and used by SARS-CoV-2 to gain entry into host cells. Blocking the receptors with the clinically proven inhibitor Camostat and other anti-androgen therapies prevented viral entry and replication, they also showed in lab studies.
The findings provide more insight into the molecular mechanisms of the virus but also support ...
LAST 30 PRESS RELEASES:
[Press-News.org] Its curvature foreshadows the next financial bubble
New paper sheds light on the higher-order architecture of financial systems and allow analysts to identify systemic risks like market bubbles or crashes
