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Tsallis Entropy for Cross-Shareholding Network Configurations
Roy Cerqueti1,2, Giulia Rotundo3, Marcel Ausloos4,5,6
1Department of Social and Economic Sciences, Sapienza University of Rome, p.le A. Moro 5, 00185 Roma, Italy.
Entropy (Basel, Switzerland)
|December 8, 2020
Summary
This study uses Tsallis entropy to analyze Italian stock market cross-shareholding networks, revealing how company integration and diversification impact market structure and response to shocks. The findings offer insights for policymakers on market polarization and fairness.
Area of Science:
- * Network Science
- * Financial Economics
- * Statistical Physics
Background:
- * Cross-shareholding networks are crucial for understanding corporate structures.
- * Company diversification (out-degree) and integration (in-degree) define industrial organization.
- * Modeling the stochastic dependence between these factors is key to market analysis.
Purpose of the Study:
- * To apply Tsallis entropy to analyze cross-shareholding networks on the Italian stock market.
- * To model the stochastic dependence between company diversification and integration using copulas.
- * To investigate how this dependence relates to market structure, polarization, and fairness under external shocks.
Main Methods:
- * Development of a Tsallis entropy approach for network analysis.
- * Utilizing copulas to model the joint distribution of diversification and integration.
- * Empirical validation on a large dataset of Italian companies.
Main Results:
- * Tsallis entropy provides insights into market structure reactions to external shocks.
- * The dependence structure between in-degree and out-degree correlates with market polarization and fairness.
- * The Tsallis entropy parameter offers guidance for policy interventions.
Conclusions:
- * The Tsallis entropy framework effectively analyzes financial networks.
- * Understanding diversification-integration dependence is crucial for market stability and policy.
- * The study validates the theoretical model with empirical data from the Italian stock market.
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