Monitoring Banking System Connectedness with Big Data

Galina Hale and Jose Lopez

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: The need to monitor aggregate financial stability was made clear during the global financial crisis of 2008-2009, and, of course, the need to monitor individual financial firms from a microprudential standpoint remains. However, linkages between financial firms cannot be observed or measured easily. In this paper, we propose a procedure that generates measures of connectedness between individual firms and for the system as a whole based on information observed only at the firm level; i.e., no explicit linkages are observed. We show how bank outcome variables of interest can be decomposed, including with mixed-frequency models, for how network analysis to measure connectedness across firms. We construct two such measures: one based on a decomposition of bank stock returns, the other based on a decomposition of their quarterly return on assets. Network analysis of these decompositions produces measures that could be of use in financial stability monitoring as well as the analysis of individual firms' linkages.

Keywords: Economics; Banking; Finance and Investment; Applied Economics; Commerce; Management; Tourism and Services (search for similar items in EconPapers)
Date: 2023-10-29
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.escholarship.org/uc/item/17h5v7rj.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: Monitoring banking system connectedness with big data (2019)
Working Paper: Monitoring Banking System Connectedness with Big Data (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt17h5v7rj

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().