Connectedness of financial institutions in Europe: A network approach across quantiles



Rok publikování 2020
Druh Článek v odborném periodiku
Časopis / Zdroj Physica A: Statistical Mechanics and its Applications
Fakulta / Pracoviště MU

Ekonomicko-správní fakulta

Klíčová slova Financial institutions; Networks; Cross-quantilogram; ERGM
Popis We create cross-quantilogram networks capturing the dependence between stock market returns of 205 financial institutions in Europe and across a large range of quantiles. Based on network density, centrality and centralization, we find that financial institutions in Europe are strongly interconnected across all quantiles, particularly during tranquil periods. These results suggest that financial institutions in Europe are susceptible to spillover, contagion and increased systemic risk. We also find an asymmetric effect: connectedness during crisis periods is higher than that during bullish periods. The most interconnected financial institutions are found to be insurance companies in Switzerland. Relying on an exponential random graph modeling (ERGM) approach, we find that across all quantiles, the connectedness is larger between (i) financial institutions in the same country, (ii) insurance companies, and (iii) financial institutions that operate in countries that adopted the common currency.