Advanced Search
MyIDEAS: Login

On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms

Contents:

Author Info

  • Francis X. Diebold

    ()
    (University of Pennsylvania and NBER)

  • Kamil Yilmaz

    (Koc University)

Abstract

We propose several connectedness measures built from pieces of variance decompositions, and we argue that they provide natural and insightful measures of connectedness among financial asset returns and volatilities. We also show that variance decompositions define weighted, directed networks, so that our connectedness measures are intimately-related to key measures of connectedness used in the network literature. Building on these insights, we track both average and daily time-varying connectedness of major U.S. financial institutions’ stock return volatilities in recent years, including during the financial crisis of 2007-2008.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1124.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1124.

as in new window
Length: 38 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:koc:wpaper:1124

Contact details of provider:
Postal: Rumelifeneri Yolu, Sarıyer, 34450 İstanbul
Phone: (90+212)-338-1302
Fax: (90+212)-338-1393
Email:
Web page: http://erf.ku.edu.tr
More information through EDIRC

Related research

Keywords: Risk measurement; risk management; portfolio allocation; market risk; credit risk; systemic risk; asset markets; degree distribution;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Francis X. Diebold & Kamil Yılmaz, 2007. "Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets," Koç University-TUSIAD Economic Research Forum Working Papers 0705, Koc University-TUSIAD Economic Research Forum.
  2. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2010. "Cascades in Networks and Aggregate Volatility," NBER Working Papers 16516, National Bureau of Economic Research, Inc.
  3. Allen, F. & Babus, A. & Carletti, E., 2010. "Financial Connections and Systemic Risk," Discussion Paper 2010-88S, Tilburg University, Center for Economic Research.
  4. Dufour, Jean-Marie & Taamouti, Abderrahim, 2010. "Short and long run causality measures: Theory and inference," Journal of Econometrics, Elsevier, vol. 154(1), pages 42-58, January.
  5. Wolfgang Karl Härdle & Ostap Okhrin & Yarema Okhrin, 2010. "Time varying Hierarchical Archimedean Copulae," SFB 649 Discussion Papers SFB649DP2010-018, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  6. Bech, Morten L. & Atalay, Enghin, 2008. "The topology of the federal funds market," Working Paper Series 0986, European Central Bank.
  7. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  8. Marcella Lucchetta & Gianni De Nicoló, 2012. "Systemic Real and Financial Risks," IMF Working Papers 12/58, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:koc:wpaper:1124. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sumru Oz).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.