Persistence in financial connectedness and systemic risk

Jozef Baruník and Michael Ellington

European Journal of Operational Research, 2024, vol. 314, issue 1, 393-407

Abstract: This paper characterizes dynamic linkages arising from shocks with heterogeneous degrees of persistence. Using frequency domain techniques, we introduce measures that identify smoothly varying links of a transitory and persistent nature. Our approach allows us to test for statistical differences in such dynamic links. We document substantial differences in transitory and persistent linkages among US financial industry volatilities, argue that they track heterogeneously persistent sources of systemic risk, and thus may serve as a useful tool for market participants.

Keywords: Finance; Network connections; Variance decompositions; Persistence; Spectral domain (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Working Paper: Persistence in Financial Connectedness and Systemic Risk (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:314:y:2024:i:1:p:393-407

DOI: 10.1016/j.ejor.2023.11.023

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