Market Stability

Exploiting the geometry of heterogeneous networks: A case study of the Indian stock market ArXiv ID: 2404.04710 “View on arXiv” Authors: Unknown Abstract In this study, we model the Indian stock market as heterogenous scale free network, which is then embedded in a two dimensional hyperbolic space through a machine learning based technique called as coalescent embedding. This allows us to apply the hyperbolic kmeans algorithm on the Poincare disc and the clusters so obtained resemble the original network communities more closely than the clusters obtained via Euclidean kmeans on the basis of well-known measures normalised mutual information and adjusted mutual information. Through this, we are able to clearly distinguish between periods of market stability and volatility by applying non-parametric statistical tests with a significance level of 0.05 to geometric measures namely hyperbolic distance and hyperbolic shortest path distance. After that, we are able to spot significant market change early by leveraging the Bollinger Band analysis on the time series of modularity in the embedded networks of each window. Finally, the radial distance and the Equidistance Angular coordinates help in visualizing the embedded network in the Poincare disc and it is seen that specific market sectors cluster together. ...

“Digitwashing”: The Gap between Words and Deeds in Digital Transformation and Stock Price Crash Risk ArXiv ID: 2403.01360 “View on arXiv” Authors: Unknown Abstract The contrast between companies’ “fleshy” promises and the “skeletal” performance in digital transformation may lead to a higher risk of stock price crash. This paper selects a sample of Shanghai and Shenzhen A-share listed companies from 2010 to 2021, empirically analyses the specific impact of the gap between words and deeds in digital transformation (GDT) on the stock price crash risk, and explores the possible causes of GDT. We found that GDT significantly increases the stock price crash risk, and this finding is still valid after a series of robustness tests. In a further study, a deeper examination of the causes of GDT reveals that firms’ perceptions of economic policy uncertainty significantly increase GDT, and the effect is more pronounced in the sample of loss-making firms. At the same time, the results of the heterogeneity test suggest that investors are more tolerant of state-owned enterprises when they are in the GDT situation. Taken together, we provide a concrete bridge between the two measures of digital transformation - digital text frequency and digital technology share - and offer new insights to enhance capital market stability. ...