Network analysis in risk assessment: a case of the Russian stock market

Abstract

The thesis is focused on introducing network theory tools to corporate finance to assess risks resulting from high correlation of stocks. Engaging in activities that increase this correlation puts company at risk of receiving shocks to share price from its partner. Such events are harmful for shareholders’ wealth, and are therefore undesirable. Research in the thesis shows that received shock can be decreased through increasing diversification and decreasing integration (in the network sense) with partner at risk. A procedure for shock magnitude assessment is suggested.