Establishment of stock portfolio based on network-based epidemic modeling in the Iranian stock market

Subject Areas : Financial engineering

samad sedaghati ¹ , Roohollah Farhadi. ² , Mir Feyz Fallah ³

1 - Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran
3 - Department of Financial Management, central Tehran Branch, Islamic Azad University. Tehran, Iran and member of Modern Financial Risk Research Group

Received: 2021-04-30 Accepted : 2021-07-17 Published : 2021-12-22

Keywords: Complex networks, Infection in the financial market, Epidemic modeling, Financial simulation,

Abstract :

Due to the importance of transmission in financial markets, in the present study, using network-based epidemic modeling, the Iranian stock market in the period from 2011 to 2020 has been analyzed in three scales: daily, seasonal and annual. For this purpose, the correlation network of 46 Iranian stock market groups has been constructed and by creating daily, seasonal and annual graphs and to identify the topological properties and structure of the Iranian stock market network, the minimum spanning tree has been calculated and transmission dynamics have been analyzed using simulations. The results show that in the daily period, the minimum cover tree has 13 groups on the main branch and in the seasonal period has 19 groups and in the annual period 28 groups are on the main branch of the minimum cover tree. Also, network-based epidemic modeling (with a thousand repetitions) showed that in the short term, the market spread is faster and the changes (for example, due to an information shock) spread to more groups. And almost all market groups are affected by the changes