*Article* **Friendship of Stock Market Indices: A Cluster-Based Investigation of Stock Markets**

**László Nagy 1 and Mihály Ormos 2,\***


Received: 3 November 2018; Accepted: 11 December 2018; Published: 13 December 2018

**Abstract:** This paper introduces a spectral clustering-based method to show that stock prices contain not only firm but also network-level information. We cluster different stock indices and reconstruct the equity index graph from historical daily closing prices. We show that tail events have a minor effect on the equity index structure. Moreover, covariance and Shannon entropy do not provide enough information about the network. However, Gaussian clusters can explain a substantial part of the total variance. In addition, cluster-wise regressions provide significant and stationer results.

**Keywords:** cluster analysis; equity index networks; machine learning
