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The Econometrics of Bayesian Graphical Models: A Review With Financial Application

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  • Ahelegbey, Daniel Felix

Abstract

Recent advances in empirical finance has shown that the adoption of network theory is critical to understand contagion and systemic vulnerabilities. While interdependencies among financial markets have been widely examined, only few studies review networks, however, they do not focus on the econometrics aspects. This paper presents a state-of-the-art review on the interface between statistics and econometrics in the inference and application of Bayesian graphical models. We specifically highlight the connections and possible applications of network models in financial econometrics, in the context of systemic risk.

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  • Ahelegbey, Daniel Felix, 2015. "The Econometrics of Bayesian Graphical Models: A Review With Financial Application," MPRA Paper 92634, University Library of Munich, Germany, revised 25 Apr 2016.
    • Handle: RePEc:pra:mprapa:92634
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    5. Kenny S, Victoria, 2019. "The Role of Public Sector Enterprise on Economic Development: A Case Study Of The Nigerian Power Sector (1981-2015)," MPRA Paper 93291, University Library of Munich, Germany.
    6. Michail Tsagris, 2021. "A New Scalable Bayesian Network Learning Algorithm with Applications to Economics," Computational Economics, Springer;Society for Computational Economics, vol. 57(1), pages 341-367, January.
    7. Bouri, Elie & Gupta, Rangan & Hosseini, Seyedmehdi & Lau, Chi Keung Marco, 2018. "Does global fear predict fear in BRICS stock markets? Evidence from a Bayesian Graphical Structural VAR model," Emerging Markets Review, Elsevier, vol. 34(C), pages 124-142.
    8. Chen, Ren-Raw & Zhang, Xiaohu, 2024. "From liquidity risk to systemic risk: A use of knowledge graph," Journal of Financial Stability, Elsevier, vol. 70(C).
    9. Kenny S, Victoria, 2019. "Effects of Human Capital Investment on Unemployment Volatility in Nigeria (1981-2015)," MPRA Paper 93295, University Library of Munich, Germany.
    10. Daniel Felix Ahelegbey & Paolo Giudici & Fatemeh Mojtahedi, 2022. "Crypto Asset Portfolio Selection," FinTech, MDPI, vol. 1(1), pages 1-9, February.
    11. Kenny S, Victoria, 2019. "Macroeconomic Performance Indicators and Exchange Rate Misalignment in Nigeria," MPRA Paper 93292, University Library of Munich, Germany.
    12. Umut Akovali, 2020. "Beyond Connectedness: A Covariance Decomposition based Network Risk Model," Koç University-TUSIAD Economic Research Forum Working Papers 2003, Koc University-TUSIAD Economic Research Forum.
    13. Kenny S, Victoria, 2019. "The role of agricultural sector performance on economic growth in Nigeria," MPRA Paper 93132, University Library of Munich, Germany.
    14. Kenny S, Victoria, 2019. "Manufacturing Sector Performance, Exchange Rate Volatility and Inclusive Growth In Nigeria (1981-2015)," MPRA Paper 93296, University Library of Munich, Germany.
    15. Victoria S, Kenny, 2019. "Effect of Foreign Direct Investment and Economic Growth in Nigeria," MPRA Paper 92873, University Library of Munich, Germany.
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    More about this item

    Keywords

    Bayesian inference; Graphical models; Model selection; Systemic risk;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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