Systemic risk and causality dynamics of the world international shipping market

Xin Zhang, Boris Podobnik, Dror Y. Kenett and H. Eugene Stanley

Physica A: Statistical Mechanics and its Applications, 2014, vol. 415, issue C, 43-53

Abstract: Various studies have reported that many economic systems have been exhibiting an increase in the correlation between different market sectors, a factor that exacerbates the level of systemic risk. We measure this systemic risk of three major world shipping markets, (i) the new ship market, (ii) the second-hand ship market, and (iii) the freight market, as well as the shipping stock market. Based on correlation networks during three time periods, that prior to the financial crisis, during the crisis, and after the crisis, minimal spanning trees (MSTs) and hierarchical trees (HTs) both exhibit complex dynamics, i.e., different market sectors tend to be more closely linked during financial crisis. Brownian distance correlation and Granger causality test both can be used to explore the directional interconnectedness of market sectors, while Brownian distance correlation captures more dependent relationships, which are not observed in the Granger causality test. These two measures can also identify and quantify market regression periods, implying that they contain predictive power for the current crisis.

Keywords: Complex networks; Systemic risk; Correlation networks; Brownian distance; Granger causality test (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:415:y:2014:i:c:p:43-53

DOI: 10.1016/j.physa.2014.07.068

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