Volume 18, No. 6, 2021
A Network Analysis Of The Pakistan Stock Exchange
Nadir Khan , Safia Bano , Muhammad Zohair Durrani
Abstract
The study uses network theory to develop, visualize and understand the stock network structures in the Pakistan Stock Exchange (PSX). An important contribution of this research is that it is the first study to use the centrality metrics and node strength to understand the stock network structures in the PSX. In this paper stock returns and stock return volatilities are used to develop the stock networks which is another contribution of the study. The highest market capitalization stocks listed on the KSE 100 Index of the PSX are studied from the year 2000 to 2018. The networks for each year were constructed and filtered using the Bonferroni Correction. Network centralities for each stock were estimated using both stock returns and stock return volatilities. The results show that stock returns volatility is a better measure for developing similarity-based networks, such as the stock networks, as compared to stock returns. It is also inferred that the PSX is influenced by a few major stocks.
Pages: 5744-5763
Keywords: Network theory; Stock returns; Stock returns volatility; Network centrality; Node strength; Pakistan Stock Exchange.