Please use this identifier to cite or link to this item:
|Title:||Ripples on financial networks|
Chakrabartia, Anindya S.
|Keywords:||Financial networks;Marketing;Volatility spillover;VAR identification;Spectral analysis;Core-periphery|
|Publisher:||Indian Institute of Management Ahmedabad|
|Abstract:||In the financial markets, asset returns exhibit collective dynamics masking individual impacts on the rest of the market. Hence, it is still an open problem to identify how shocks originating from one particular asset would create spillover effects across other assets. The problem is more acute when there is a large number of simultaneously traded assets, making the identification of which asset affects which other assets even more difficult. In this paper, we construct a network of the conditional volatility series estimated from asset returns and propose a many-dimensional VAR model with unique identification criteria based on the network topology. Because of the interlinkages across stocks, volatility shock to a particular asset propagates through the network creating a ripple effect. Our method allows us to find the exact path the ripple effect follows on the whole network of assets.|
|Appears in Collections:||Working Papers|
Files in This Item:
|WP_2019-10-01.pdf||WP_2019_10_01||2.02 MB||Adobe PDF||View/Open|
Items in IIMA Institutional Repository are protected by copyright, with all rights reserved, unless otherwise indicated.