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Shareholding Networks Stefano Battiston
Lab. de Physique Statistique
Ecole Normale Supérieure, Paris
June 9th, Exystence Thematic Institute, Budapest
COSIN is a FET project (Future and Emergent Technologies)
Information Technologies Networks as a novel ‘natural phenomenon’ :•measuring, modeling, shaping the evolution
2 Computer Science Labs. + 4 Statistical Physics Labs. to address:
•Social Networks (G.Weisbuch, ENS Paris)•Technological Networks (A.Vespignani, Paris Sud)•Congestion (A.Diaz Guilera, Univ. Barcelona)•Massive Webgraphs (S.Leonardi, La sapienza,Rome)•Networks Visualization (D.Wagner, Univ.Konstanz)
Coevolution and Self-Organization in Dynamical Networks Funded by IST department - EU commission
S.Battiston, Exystence T.I., Budapest, June 9th 2004
OverviewOverview
•Motivations : the role of firm networks.
•About real and reshuffled board networks: degree, clustering and assortativity.
•Shareholding networks: extracting the network backbone from local quantities.
•Work plan: designing models of firm network dynamics.
S.Battiston, Exystence T.I., Budapest, June 9th 2004
MotivationsMotivations
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Socio-economic Network Data Sets Socio-economic Network Data Sets (1998-2004)(1998-2004)
•Collaborations: scientists and movie actors (Newman et al., Barabasi et al.,... )
•Collaborations: corporate board directors (Davis et al., Newman et al., Battiston et al.,…)
•Asset return correlations (Kertész and coll., Mantegna and coll.,... )
•Shareholding networks (Stark and Vedres, Battiston et al. 2003 )
•The World Trade Web (WTW) (Serrano and Boguna 2003)
•Energy suppliers. (Amaral et al. 1999,…)
•Internet and WWW (Barabasi and Albert, Pastor-Satorras and Vespignani,…)
•Airports (Barrat et al. 2004, Amaral and coll.)
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Large Corporations are connected in networks:
•Board and Director Network: some directors serve on several boards
•Company and Investor Network: some investors own shares of several companies
S.Battiston, Exystence T.I., Budapest, June 9th 2004
6.40445
6.93145
7.45846
7.98547
8.51247
9.03948
9.56648
10.0935
10.6205
11.1475
AbbeyNatl
ColgPalmo
Computactr
FinTimes
Manpower
Nokia
Pearson
Thomson
TWarnerBell DC
Burns T
Lescuyer G
Mark R
Ogden PJ
Scardino MM
Stevenson Of Coddenham HD
Boards and directors, example I
S.Battiston, Exystence T.I., Budapest, June 9th 2004
6.66371
7.32707
7.99043
8.65379
9.31714
9.9805
10.6439
11.3072
11.9706
12.6339
AirLiquide
At&T
Bp
CocaCola
Egg
GlaxoSK
ReedElsevier
Reuters
ShellTradingIntl
Siemens
Economist
TLC02 Unilever
Yahoo
Barzach M
Coombe JD
Culp LDavis CH
Fitzgerald NW
Garnier JP
Hogg CA
Job PJ
Kozel ER
Mcarthur JH
Mchenry D
Mendoza R
Olver RL
Prosser IM
Schmitz RH
Shapiro L
Wilson R
Yamada T
Boards and directors, example II
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Three degrees away from Parmalat
S.Battiston, Exystence T.I., Budapest, June 9th 2004
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Who decides what?
(or why Board-Directors Networks are important)
Boards and Directors
Decision Making Dynamics
Uncertain Future •What is the Network
Topology? [Battiston and Catanzaro 2004]
•Can a minority drive the decision of a board? [Battiston, Bonabeau, Weisbuch 2003]
•When do several boards converge to making the same decision? [Battiston,Weisbuch, Bonabeau. 2003]
Consensus: the ‘Best’ Decision
Social Influence‘Herd’ Behavior
Consensus on a another decision
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Who owns whom?
(or why Shareholding Networks are important)
Large Investors
Capital Control
Indirect Control
•Can we classify control networks in stock markets based on global properties?
•What can be inferred about financial agents’ behavior?
[Garlaschelli, Battiston, Caldarelli 2004] [Caldarelli, Battiston, Garlaschelli 2003]
•Is there a subset of ‘superholders’ controlling the market
•How do they share out the market among themselves?
[Battiston 2004]
[Battiston, Garlaschelli, Caldarelli 2004]
Democratic Corporate Control
Failure Cascades
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Social bipartite networks: Social bipartite networks:
deviations from random bipartite graphsdeviations from random bipartite graphs
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Reshuffling under constraints
•Keep the number of directors per board
•Keep the number of boards per director
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Board-Director Nets in US: real versus reshuffled
Boards
Dir.
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Board-Director Nets in Italy: real versus reshuffled
Boards
Dir.
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Preliminary Conclusions on Constrained bipartite random graphs:
• Fix: Nb boards, Nd directors, vector of boards size
• random assignment: number of appointments per director follows a binomial distribution• in real data directors with more than 5 appointments are much more frequent
•Fix: Nb boards, Nd directors, vector of boards size, vector of number of appointments of each director
• deviations from random assignment: board degree distribution and assortativity
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Shareholding Networks: Shareholding Networks:
extracting the network backbone from local extracting the network backbone from local quantitiesquantities
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Network Representation
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Coloniale srl
Parmalat
50.6%
•MIB = Milan stock exchange market. Data from Banca Nazionale del lavoro.NS = 240 NH=698 N=868 Nreduced=121
•NASDAQ. Data from Lycos Finance.NS=3134 NH=2099 N=5209 Nreduced =337
•NYSE. New York stock exchange market. Data from Lycos Finance.NS=2427 NH=1915 N=4263 Nreduced =1118
Data Sets
S.Battiston, Exystence T.I., Budapest, June 9th 2004
The Milan Stock Exchange Market Network (MIB)
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Portfolio Diversification
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Invested Volume
Invested volume vi=j wij Cj ~ k
(to compare with the notion node of strength, Barrat et al. 2004)[Garlaschelli, Battiston, Caldarelli 2004]
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Ownership Concentration
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Control Indices Histograms Number of
effective holdersITALY
US markets
Number of controlled companies, ITALY
US markets
S.Battiston, Exystence T.I., Budapest, June 9th 2004
SI ~out degree
HI ~in degree
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Control Indices SI, HI
Network Re-building
‘Superholder’
Network ‘Backbone’
(local quantities)
(global quantities)
From micro to macro quantities
‘Superholders’ controlling the market
S.Battiston, Exystence T.I., Budapest, June 9th 2004
MIB superholder network
S.Battiston, Exystence T.I., Budapest, June 9th 2004
MIB Supeholders (the first 30) NYSE Supeholders
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Designing models of firm network dynamics
S.Battiston, Exystence T.I., Budapest, June 9th 2004
•Node Dynamics dxi/dt= jfij(xi,xj,aij,aji)
•Edge Dynamics daij/dt=gij(xi,xj,aij,aji) , (if (i,j) in E)
•Edge Evolution P{(i,j) in E }= h(xi, xj,Top. Prop. ( i,j) )
x2
a12
a21
x1
xi>0, aij>0 : real numbersE: set of edges
Class of Models
S.Battiston, Exystence T.I., Budapest, June 9th 2004
dxi/d(t) =jf(xi,xj,aij,aji) <<1
daij/dt=df(xi,xj,aij,aji)/daij (if (i,j) in E)
Nodes and Edge Dynamics on a Static Graph
Ex. 1: f(xi,xj,aij,aji)= (aij – a2ij xi) xj
An equilibrium a*={aij*(xi,xj)} exists for any x>0 and therefore for any network topology.
Ex. 2: f(xi,xj,aij,aji)= (aij – a2ji xi) xj
No equilibrium a* exists for any x>0 and therefore for any network topology.
In general : the existence and the value of aij* depends on (xi,xj) Ex: subgraphs of nodes in a range of x values may reach an equilibrium.
[Battiston and Weisbuch 2004]
S.Battiston, Exystence T.I., Budapest, June 9th 2004
•Node Dynamics dxi/dt= jfij(xi,xj,aij,aji)•Edge Dynamics daij/dt=gij(xi,xj,aij,aji) , (if (i,j) in E)•Edge Evolution P{(i,j) in E }= h(xi, xj,Top. Prop. ( i,j) )
x2
a12
a21
x1
xi>0, aij>0 : real numbersE: set of edges
Work Plan
• narrow down the class of functions f and h
• constraints on aij ?
• build models that can be tested on data of firm network over time
S.Battiston, Exystence T.I., Budapest, June 9th 2004
Conclusions• Board Networks: deviations from random bipartite networks with constraints
• Shareholding networks: in-degree, out degree must be replaced with other local quantities. It turns out that these one allow to extract the backbone of the network
•Open question: how to narrow down the class of models of firm network dynamics/evolution
References
All references are available at
http://www.lps.ens.fr/battiston/ [email protected]
S.Battiston, Exystence T.I., Budapest, June 9th 2004