Analysis of Chinese stock market from a complex network perspective: Better to invest in the central

In this paper, we investigate the dynamics of Chinese stock market from a complex network perspective, based on daily fluctuations of all stocks during 1906 working day period from 2005 to 2012. In the network being constructed, each node is a stock, and each edge indicates the time correlation coefficient of two stocks over a window of T days. The network evolves chronologically as the window slides in forward time at a ΔT-days interval. By examining the variation of the network parameters as time elapses, we show that the degree distributions of Chinese stock market networks are heavy-tailed, but cannot follow the power-law when the Chinese stock market experiences a bear market. And the edge density is exceedingly large at the bearish periods. Moreover, we discuss how a network approach can be used to build a well-diversified portfolio. We find that investments in stocks that occupy central, highly connected in the Chinese stock network outperform after the intervention of positive policy.