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A compositional analysis of systemic risk in European financial institutions

Author

Listed:
  • Anna Maria Fiori

    (Università degli Studi di Milano-Bicocca)

  • Francesco Porro

    (Università degli Studi di Genova)

Abstract

Systemic risk is a complex and multifaceted phenomenon that needs to be addressed from different perspectives. In this work we propose a Compositional Data (CoDa) approach to analyze the distribution of relative contributions to systemic risk associated with major European countries during the period 2008–2021. We represent systemic risk measures corresponding to those countries as percentage shares, or parts, of a compositional dataset and we perform a multivariate statistical analysis using specific CoDa procedures. The proposed approach sheds new light on some variability patterns and cross-country relationships that appear to be linked to the composition of systemic risk parts in the system.

Suggested Citation

  • Anna Maria Fiori & Francesco Porro, 2023. "A compositional analysis of systemic risk in European financial institutions," Annals of Finance, Springer, vol. 19(3), pages 325-354, September.
    • Handle: RePEc:kap:annfin:v:19:y:2023:i:3:d:10.1007_s10436-023-00427-0
    DOI: 10.1007/s10436-023-00427-0
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    References listed on IDEAS

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    Cited by:

    1. Germ`a Coenders & N'uria Arimany Serrat, 2023. "Accounting statement analysis at industry level. A gentle introduction to the compositional approach," Papers 2305.16842, arXiv.org, revised Feb 2024.

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    More about this item

    Keywords

    Systemic risk share; SRISK; Compositional Data (CoDa); Aitchison geometry; Logratio coordinates;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General

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