Evolving Network Analysis of S&P500 Components: COVID-19 Influence of Cross-Correlation Network Structure

Abstract

The economy is a system of complex interactions. The COVID-19 pandemic strongly influenced economies, particularly through introduced restrictions, which formed a completely new economic environment. The present work focuses on the changes induced by the COVID-19 epidemic on the correlation network structure. The analysis is performed on a representative set of USA companies—the S&P500 components. Four different network structures are constructed (strong, weak, typically, and significantly connected networks), and the rank entropy, cycle entropy, averaged clustering coefficient, and transitivity evolution are established and discussed. Based on the mentioned structural parameters, four different stages have been distinguished during the COVID-19-induced crisis. The proposed network properties and their applicability to a crisis-distinguishing problem are discussed. Moreover, the optimal time window problem is analysed.