Journal of Applied Finance & Banking

Network Evolution of the Chinese Stock Market: A Study based on the CSI 300 Index

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  • Abstract

    As an emerging market, Chinese stock market is playing an increasingly important role in global financial system. This market deserves more detailed studies for its potential to develop with the progress of Chinese financial reform. By analyzing topological properties and their temporal changes, this paper provides a new perspective of network evolution for Chinese stock market with the emphasis on interdependencies among stocks. The sample of this study is the selected constituent stocks of CSI 300 index. We empirically analyze correlation matrices and correlation-based networks by employing rolling window approach. In the study, the small world property of the network and positive correlations between stocks are found and some key stocks even play important roles to exert more influences on the others. Further study demonstrates the close relationship between network structure and market fluctuation.

    JEL classification numbers: C13, C53, G11, G17
    Keywords: Correlation matrix, Network analysis, Influence strength, Centrality, CSI 300 index