Sectoral Growth and Centrality in Stock Market in Iran: Application of Complex Network Analysis

Stock price and its changes which reflect the individuals’ investment decisions in economic environment are the most important factors in evaluating the economic value of a company in stock market. Stock price changes are not independent of each other. Therefore, study of the correlation between stock price changes provides a better understanding of market performance for investors. Analysis of the stock market based on complex networks makes it possible to study the correlation of stock prices. In this paper, using the stock market data in Tehran Stock Exchange, Iran's stock market network is created by the threshold method, then the structural characteristics of the network are examined and the stock centrality is calculated. By examining the criterion of the stock centrality in the network and ranking industries based on it, results show that the industries producing chemical products with a relatively higher value added ratio have the highest degree of centrality among other industries. In addition, major economic sectors with more growth are relatively more centralized. Hence, if the industry has more growth, the relationship between its stocks may be stronger and more centralized. In other words, sectoral growth in Iran economy can reflect in centrality or relationship between stocks in that sector. These analyses provide a more in-depth insight into the structure of the stock market.