Dynamic effects of network exposure on equity markets

Mardi Dungey, Moses Kangogo () and Vladimir Volkov
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Moses Kangogo: University of Tasmania
Vladimir Volkov: University of Tasmania

Eurasian Economic Review, 2022, vol. 12, issue 4, No 1, 569-629

Abstract: Abstract We investigate the contribution of network exposure to both shock transmission and absorption. Our data sample comprises 45 economies for the period 1998–2018 to which we apply spatial econometric estimation technique. Our empirical 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. The results show high exposure of the financial system to vulnerabilities. The results suggest the changing market conditions increase the exposures to the financial system. Thus, effective ways to monitor the financial system should be implemented by the policy makers to reduce the chances of financial instabilities.

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)
Date: 2022
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DOI: 10.1007/s40822-022-00210-y

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