A0158
Title: Estimating financial networks by realized interdependencies: A restricted vector autoregressive approach
Authors: Massimiliano Caporin - University of Padova (Italy) [presenting]
Deniz Erdemlioglu - IESEG School of Management (France)
Stefano Nasini - IESEG School of Management (France)
Abstract: A network-based vector autoregressive approach is developed to uncover the interactions among financial assets by integrating multiple realized measures. Under a restricted parameter structure, our approach captures cross-sectional and time dependencies embedded in a large panel of assets. We propose a block coordinate descent procedure for the least square estimation and investigate its theoretical properties. Using U.S. data, we identify a large array of interdependencies with a limited computational effort. We also provide a new ranking for the systemically important financial institutions and carry out an impulse-response analysis to quantify the effects of adverse shocks on the financial system.
