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Centrality-based measures of financial institutions’ systemic importance: A tail dependence network view

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  • Wang, Dan
  • Huang, Wei-Qiang

Abstract

This study measures systemic importance of financial institutions based on network centralities and links them to institutions’ characteristics. We focus on the lower tail dependence networks constructed by combining Clayton copula model and planar maximally filtered graph method. Considering different centrality measures’ correlations, we obtain the comprehensive centrality index about systemic importance by principal component analysis. The centrality measures can capture cross-sectional differences and time-series variations of systemic importance. The financial institutions with higher leverage, lower price earning ratio, lower total assets turnover rate and lower return on equity tend to have higher systemic importance based on tail dependence.

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  • Wang, Dan & Huang, Wei-Qiang, 2021. "Centrality-based measures of financial institutions’ systemic importance: A tail dependence network view," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 562(C).
    • Handle: RePEc:eee:phsmap:v:562:y:2021:i:c:s0378437120307081
    DOI: 10.1016/j.physa.2020.125345
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