A0174
Title: Penalized CAW, forecast error variance decompositions and systemic risk measurement
Authors: Massimiliano Caporin - University of Padova (Italy) [presenting]
Giuseppe Storti - University of Salerno (Italy)
Abstract: Parameter estimation of the Conditional Autoregressive Wishart model under penalization is discussed. We introduce two novel Forecast Error Variance Decompositions where returns shocks impact on the entire set of realized variances and covariances, the first following a more traditional approach and the second based on simulations. From both decompositions, we derive a spillover index to monitor the systemic risk. An empirical analysis of US large cap equities exemplifies our proposals.
