On the network topology of variance decompositions: Measuring the connectedness of financial firms

Francis Diebold and Kamil Yilmaz ()

No 11-45, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: The authors propose several connectedness measures built from pieces of variance decompositions, and they argue that they provide natural and insightful measures of connectedness among financial asset returns and volatilities. The authors also show that variance decompositions define weighted, directed networks, so that their connectedness measures are intimately-related to key measures of connectedness used in the network literature. Building on these insights, the authors track both average and daily time-varying connectedness of major U.S. financial institutions' stock return volatilities in recent years, including during the financial crisis of 2007-2008.

Keywords: Portfolio management; Systemic risk; Risk management (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: On the network topology of variance decompositions: Measuring the connectedness of financial firms (2014)
Working Paper: On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms (2011)
Working Paper: On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms (2011)
Working Paper: On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms (2011)
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