A new measure of the resilience for networks of funds with applications to socially responsible investments

Roy Cerqueti, Rocco Ciciretti, Ambrogio Dalò and Marco Nicolosi

Physica A: Statistical Mechanics and its Applications, 2022, vol. 593, issue C

Abstract: This paper provides a novel resilience measure of a family of networks in terms of stability of its community structure. To this aim, we assign to each node a probability distribution and introduce an exogenous shock as a lump sum perturbing its left tail. Then, we measure the reactions of the considered networks to the occurrence of such exogenous shocks. Starting from the intuitive interpretation of the methodological proposal in the financial context, we employ it to compare portfolios of funds with different ranks in terms of the Environmental, Social and Governance score. In particular, we consider financial networks whose nodes represent funds, and edges are weighted on the basis of the capitalization due to the common components of the connected nodes. Interestingly, we find that the considered network of High ranked funds is more resilient than the corresponding network of Low ranked funds when funds are small-sized. The opposite behavior is observed for the big-sized funds.

Keywords: Complex networks; Resilience; Community structure; Socially responsible investments; ESG criteria; Investment funds (search for similar items in EconPapers)
JEL-codes: C02 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:593:y:2022:i:c:s037843712200070x

DOI: 10.1016/j.physa.2022.126976

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