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Open AccessArticle

Investigating the Configurations in Cross-Shareholding: A Joint Copula-Entropy Approach

by Roy Cerqueti 1,†, Giulia Rotundo 2,*,† and Marcel Ausloos 3,†
1
Department of Economics and Law, University of Macerata, via Crescimbeni, 20, Macerata 62100, Italy
2
Department of Statistical Sciences, Sapienza University of Rome, p.le A. Moro 5, Roma 00185, Italy
3
School of Business, University of Leicester, University Road, Leicester LE1 7RH, UK
*
Author to whom correspondence should be addressed.
These authors contributed equally to this work.
Entropy 2018, 20(2), 134; https://doi.org/10.3390/e20020134
Received: 24 December 2017 / Revised: 16 February 2018 / Accepted: 17 February 2018 / Published: 20 February 2018
(This article belongs to the Special Issue Statistical Mechanics of Complex and Disordered Systems)
The complex nature of the interlacement of economic actors is quite evident at the level of the Stock market, where any company may actually interact with the other companies buying and selling their shares. In this respect, the companies populating a Stock market, along with their connections, can be effectively modeled through a directed network, where the nodes represent the companies, and the links indicate the ownership. This paper deals with this theme and discusses the concentration of a market. A cross-shareholding matrix is considered, along with two key factors: the node out-degree distribution which represents the diversification of investments in terms of the number of involved companies, and the node in-degree distribution which reports the integration of a company due to the sales of its own shares to other companies. While diversification is widely explored in the literature, integration is most present in literature on contagions. This paper captures such quantities of interest in the two frameworks and studies the stochastic dependence of diversification and integration through a copula approach. We adopt entropies as measures for assessing the concentration in the market. The main question is to assess the dependence structure leading to a better description of the data or to market polarization (minimal entropy) or market fairness (maximal entropy). In so doing, we derive information on the way in which the in- and out-degrees should be connected in order to shape the market. The question is of interest to regulators bodies, as witnessed by specific alert threshold published on the US mergers guidelines for limiting the possibility of acquisitions and the prevalence of a single company on the market. Indeed, all countries and the EU have also rules or guidelines in order to limit concentrations, in a country or across borders, respectively. The calibration of copulas and model parameters on the basis of real data serves as an illustrative application of the theoretical proposal. View Full-Text
Keywords: entropy; cross-shareholdings; concentration; copulas entropy; cross-shareholdings; concentration; copulas
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Cerqueti, R.; Rotundo, G.; Ausloos, M. Investigating the Configurations in Cross-Shareholding: A Joint Copula-Entropy Approach. Entropy 2018, 20, 134.

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