Clustered Network Connectedness:A New Measurement Frameworkwith Application to Global Equity Markets

Bastien Buchwalter (), Francis Diebold () and Kamil Yilmaz ()
Additional contact information
Bastien Buchwalter: SKEMA Business School and Universite Cote d’Azur
Francis Diebold: University of Pennsylvania & NBER

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We study the properties of macroeconomic survey forecast response averages as the number of survey respondents grows. Such averages are “portfolios” of forecasts. We characterize the speed and pattern of the gains from diversification and their eventual decrease with portfolio size (the number of survey respondents) in both (1) the key real-world data-based environment of the U.S. Survey of Professional Forecasters (SPF), and (2) the theoretical model-based environment of equicorrelated forecast errors. We proceed by proposing and comparing various direct and model-based “crowd size signature plots”, which summarize the forecasting performance of k-average forecasts as a function of k, where k is the number of forecasts in the average. We then estimate the equicorrelation model for growth and inflation forecast errors by choosing model parameters to minimize the divergence between direct and model-based signature plots. The results indicate near-perfect equicorrelation model fit for both growth and inflation, which we explicate by showing analytically that, under conditions, the direct and fitted equicorrelation model-based signature plots are identical at a particular model parameter configuration. We find that the gains from diversification are greater for inflation forecasts than for growth forecasts, but that both gains nevertheless decrease quite quickly, so that fewer SPF respondents than currently used may be adequate.

Keywords: Network; Centrality; Spillover; Contagion; Interdependence; Co-movement (search for similar items in EconPapers)
JEL-codes: F01 G01 G15 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2025-02-21
New Economics Papers: this item is included in nep-mac and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://economics.sas.upenn.edu/system/files/worki ... per%20Submission.pdf (application/pdf)

Related works:
Working Paper: Clustered Network Connectedness: A New Measurement Framework with Application to Global Equity Markets (2025)
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:pen:papers:25-009

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().