Dynamic effects of network exposure on equity markets

Moses Kangogo () and Vladimir Volkov ()
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Moses Kangogo: Tasmanian School of Business & Economics, University of Tasmania, http://www.utas.edu.au/business-and-economics
Vladimir Volkov: Tasmanian School of Business & Economics, University of Tasmania, https://www.utas.edu.au/profiles/staff/economics/vladimir-volkov

No 2021-03, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: Until recently, there has been a growing research focusing on how to predict systemic risks to minimise the recurrence of financial crises, while the importance of understanding how network exposure contributes to the spread of financial distress in the financial system has been largely underestimated. This paper investigates whether network exposure contributes to both shock transmission and absorption. We utilise data from 45 economies and our findings show that both network intensity and interconnectedness in the financial system have impact on increasing network exposure. We also demonstrate how to estimate network intensity in the financial system. Our results indicate that an increased network intensity parameter is associated to period when the financial system is under stress.

Keywords: Financial markets; financial networks; financial stability (search for similar items in EconPapers)
JEL-codes: C21 G01 G10 G15 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2021
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-isf and nep-net
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Published by the University of Tasmania. Discussion paper 2021-03

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