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Nets: Network Estimation for Time Series

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Author Info

  • Matteo Barigozzi
  • Christian Brownlees

Abstract

This work proposes novel network analysis techniques for multivariate time series. We define the network of a multivariate time series as a graph where vertices denote the components of the process and edges denote non-zero long run partial correlations. We then introduce a two step lasso procedure, called nets, to estimate high-dimensional sparse Long Run Partial Correlation networks. This approach is based on a var approximation of the process and allows to decompose the long run linkages into the contribution of the dynamic and contemporaneous dependence relations of the system. The large sample properties of the estimator are analysed and we establish conditions for consistent selection and estimation of the non-zero long run partial correlations. The methodology is illustrated with an application to a panel of U.S. bluechips.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 723.

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Date of creation: Oct 2013
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Handle: RePEc:bge:wpaper:723

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Keywords: Networks; Multivariate Time Series; Long Run Covariance; Lasso;

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  2. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-38, August.
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  8. Christine De Mol & Domenico Giannone & Lucrezia Reichlin, 2008. "Forecasting using a large number of predictors: is Bayesian shrinkage a valid alternative to principal components?," ULB Institutional Repository 2013/6411, ULB -- Universite Libre de Bruxelles.
  9. Nikolaus Hautsch & Julia Schaumburg & Melanie Schienle, 2011. "Financial Network Systemic Risk Contributions," SFB 649 Discussion Papers SFB649DP2011-072, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. NBER/NSF Time-Series Conference: Retrospect and Prospect
    by Francis Diebold in No Hesitations on 2013-10-25 13:14:00
  2. Network Estimation for Time Series
    by Francis Diebold in No Hesitations on 2013-10-16 11:41:00
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Cited by:
  1. Aldasoro, Iñaki & Angeloni, Ignazio, 2013. "Input-output-based measures of systemic importance," SAFE Working Paper Series 29, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  2. Natalia Bailey & Sean Holly & N. Hashem Pesaran, 2013. "A Two Stage Approach to Spatiotemporal Analysis with Strong and weak cross Sectional Dependence," Cambridge Working Papers in Economics 1362, Faculty of Economics, University of Cambridge.
  3. Paolo Giudici & Alessandro Spelta, 2013. "Graphical network models for international financial flows," DEM Working Papers Series 052, University of Pavia, Department of Economics and Management.
  4. Kamil Yilmaz, 2014. "Volatility Connectedness of Bank Stocks Across the Atlantic," Koç University-TUSIAD Economic Research Forum Working Papers 1402, Koc University-TUSIAD Economic Research Forum.
  5. Sessi Tokpavi, 2013. "Testing for the Systemically Important Financial Institutions: a Conditional Approach," EconomiX Working Papers 2013-27, University of Paris West - Nanterre la Défense, EconomiX.

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