Estimation and model-based combination of causality networks among large US banks and insurance companies

Giovanni Bonaccolto, Massimiliano Caporin and Roberto Panzica

Journal of Empirical Finance, 2019, vol. 54, issue C, 1-21

Abstract: Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used the standard Granger causality to detect for the presence of contemporaneous links among financial institutions, that, in turn, determine a network structure. Subsequent studies have combined the estimated networks with traditional pricing or risk measurement models to improve their fit to empirical data. In this paper, we provide two contributions. First, we show how to use a linear factor model as a device for estimating a combination of several networks that monitor the links across variables from different viewpoints. Second, we highlight the advantages of combining quantile-based methods with the Granger causality when the focus is on risk propagation. The empirical evidence supports our contributions.

Keywords: Granger causality; Quantile causality; Multi-layer network; Network combination (search for similar items in EconPapers)
JEL-codes: C31 C32 C58 G01 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539819300738
Full text for ScienceDirect subscribers only

Related works:
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:eee:empfin:v:54:y:2019:i:c:p:1-21

DOI: 10.1016/j.jempfin.2019.08.008

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().