An analysis of network filtering methods to sovereign bond yields during COVID-19

Raymond Ka-Kay Pang, Oscar M. Granados, Harsh Chhajer and Erika Fille T. Legara

Physica A: Statistical Mechanics and its Applications, 2021, vol. 574, issue C

Abstract: In this work, we investigate the impact of the COVID-19 pandemic on sovereign bond yields. We consider the temporal changes from financial correlations using network filtering methods. These methods consider a subset of links within the correlation matrix, which gives rise to a network structure. We use sovereign bond yield data from 17 European countries between the 2010 and 2020 period. We find the mean correlation to decrease across all filtering methods during the COVID-19 period. We also observe a distinctive trend between filtering methods under multiple network centrality measures. We then relate the significance of economic and health variables towards filtered networks within the COVID-19 period. Under an exponential random graph model, we are able to identify key relations between economic groups across different filtering methods.

Keywords: Sovereign bonds; Crisis; Financial correlations; Econophysics (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:574:y:2021:i:c:s0378437121002673

DOI: 10.1016/j.physa.2021.125995

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