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Tsallis Entropy for Cross-Shareholding Network Configurations

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journal contribution
posted on 06.08.2020, 10:37 by Roy Cerqueti, Giulia Rotundo, Marcel Ausloos
In this work, we develop the Tsallis entropy approach for examining the cross-shareholding network of companies traded on the Italian stock market. In such a network, the nodes represent the companies, and the links represent the ownership. Within this context, we introduce the out-degree of the nodes—which represents the diversification—and the in-degree of them—capturing the integration. Diversification and integration allow a clear description of the industrial structure that were formed by the considered companies. The stochastic dependence of diversification and integration is modeled through copulas. We argue that copulas are well suited for modelling the joint distribution. The analysis of the stochastic dependence between integration and diversification by means of the Tsallis entropy gives a crucial information on the reaction of the market structure to the external shocks—on the basis of some relevant cases of dependence between the considered variables. In this respect, the considered entropy framework provides insights on the relationship between in-degree and out-degree dependence structure and market polarisation or fairness. Moreover, the interpretation of the results in the light of the Tsallis entropy parameter gives relevant suggestions for policymakers who aim at shaping the industrial context for having high polarisation or fair joint distribution of diversification and integration. Furthermore, a discussion of possible parametrisations of the in-degree and out-degree marginal distribution—by means of power laws or exponential functions— is also carried out. An empirical experiment on a large dataset of Italian companies validates the theoretical framework.

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Citation

Entropy 2020, 22(6), 676; https://doi.org/10.3390/e22060676

Version

VoR (Version of Record)

Published in

Entropy

Volume

22

Issue

6

Pagination

676

Publisher

MDPI

eissn

1099-4300

Acceptance date

13/06/2020

Copyright date

2020

Available date

06/08/2020

Language

en

Publisher version

https://www.mdpi.com/1099-4300/22/6/676

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