Clustering in Dynamic Causal Networks as a Measure of Systemic Risk on the Euro Zone
Monica Billio,
Lorenzo Frattarolo (),
Hayette Gatfaoui and
Philippe de Peretti ()
Additional contact information
Lorenzo Frattarolo: University Ca' Foscari of Venice - Department of Economics, http://www.unive.it/
Philippe de Peretti: Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.univ-paris1.fr
Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne
Abstract:
In this paper, we analyze the dynamic relationships between ten stock exchanges of the euro zone using Granger causal networks. Using returns for which we allow the variance to follow a Markov-Switching GARCH or a Changing-Point GARCH, we first show that over different periods, the topology of the network is highly unstable. In particular, over very recent years, dynamic relationships vanish. Then, expanding on this idea, we analyze patterns of information transmission. Using rolling windows to analyze the topologies of the network in terms of clustering, we show that the nodes' state changes continually, and that the system exhibits a high degree of flickering in information transmission. During periods of flickering, the system also exhibits desynchronization in the information transmission process. These periods do precede tipping points or phase transitions on the market, especially before the global financial crisis, and can thus be used as early warnings of phase transitions. To our knowledge, this is the first time that flickering clusters are identified on financial markets, and that flickering is related to phase transitions
Keywords: Causal Network; Topology; Clustering; Flickering; Desynchronisation; Phase transitions (search for similar items in EconPapers)
JEL-codes: C18 C52 G17 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-net, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
Working Paper: Clustering in Dynamic Causal Networks as a Measure of Systemic Risk on the Euro Zone (2016) 
Working Paper: Clustering in Dynamic Causal Networks as a Measure of Systemic Risk on the Euro Zone (2016) 
Working Paper: Clustering in Dynamic Causal Networks as a Measure of Systemic Risk on the Euro Zone (2016) 
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:mse:cesdoc:16046
Access Statistics for this paper
More papers in Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().