EconPapers    
Economics at your fingertips  
 

Proper measures of connectedness

Mario Maggi (), Maria-Laura Torrente () and Pierpaolo Uberti ()
Additional contact information
Mario Maggi: Università di Pavia
Maria-Laura Torrente: Università di Genova
Pierpaolo Uberti: Università di Genova

Annals of Finance, 2020, vol. 16, issue 4, No 4, 547-571

Abstract: Abstract The concept of connectedness has been widely used in financial applications, in particular for systemic risk detection. Despite its popularity, at the state of the art, a rigorous definition of connectedness is still missing. In this paper we propose a general definition of connectedness introducing the notion of proper measures of connectedness (PMCs). Based on the classical concept of mean introduced by Chisini, we define a family of PMCs and prove some useful properties. Further, we investigate whether the most popular measures of connectedness available in the literature are consistent with the proposed theoretical framework. We also compare different measures in terms of forecasting performances on real financial data. The empirical evidence shows the forecasting superiority of the PMCs compared to the measures that do not satisfy the theoretical properties. Moreover, the empirical results support the evidence that the PMCs can be useful to detect in advance financial bubbles, crises, and, in general, for systemic risk detection.

Keywords: Connectedness; Systemic risk; Market risk; Financial crisis (search for similar items in EconPapers)
JEL-codes: C60 E30 G01 G10 G17 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10436-020-00363-3 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:annfin:v:16:y:2020:i:4:d:10.1007_s10436-020-00363-3

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10436/PS2

DOI: 10.1007/s10436-020-00363-3

Access Statistics for this article

Annals of Finance is currently edited by Anne Villamil

More articles in Annals of Finance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-04-09
Handle: RePEc:kap:annfin:v:16:y:2020:i:4:d:10.1007_s10436-020-00363-3