Identification of crisis in the Chinese stock market based on complex network

ABSTRACT

In this article, we construct a Laplacian energy indicator to identify the financial crisis. Firstly, we use the Chinese A-shares market over the period from 2006 to 2017 to build complex networks year by year. Then, a network characteristic indicator based on Laplacian energy is built up to discern the subprime crisis, the European debt crisis and the Chinese stock market crash. The advantage of the proposed indicator lies in the fact that it has higher accuracy, less processing time, and better applicability, compared with the classical indicators such as average degree, modularity, average clustering coefficient, and characteristic path length.

KEYWORDS:

• Complex network
• stock market
• financial crisis
• Laplacian energy

JEL CLASSIFICATION:

• B23
• B41

Acknowledgments

The authors are extremely grateful to the editors and anonymous reviewers for their constructive comments which helped to improve the present article. Research for this article was supported by the National Natural Science Foundation of China (Nos. 72192800, 72101035, 71471020) and the Excellent Youth Foundation of Educational Committee of Hunan Provincial (No.21B0339).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The data is provided by China Stock Market and Accounting Research Database: (https://www.gtarsc.com).