WG Risk : “Clustered Network Connectedness: A New Measurement Framework with Application to Global Equity Markets”

The Working Group on Risk - CREAR, with the support of the ESSEC IDO dpt/Ceressec, Institut des actuaires, Labex MME-DII (CY), and the group Risques AEF - SFdS, has the pleasure to invite you to the seminar by:

Dr. Bastien BUCHWALTER, SKEMA Business School Paris, France

Bastien Buchwalter currently holds the position of Assistant Professor of Finance at SKEMA Business School located in Paris, France. Bastien's educational background includes a Ph.D. in Finance from ESSEC Business School, Paris, France, and a Master of Science in Quantitative Economics from the University of Tübingen in Germany. His academic journey explores the intricate connection between finance and data science, with his research primarily focusing on Asset Pricing, FinTech, and Financial Stability.

“Clustered Network Connectedness: A New Measurement Framework with Application to Global Equity Markets”

Network connections, both across and within markets, are central in countless economic contexts. In recent decades, a large literature has developed and applied flexible methods for measuring network connectedness and its evolution, based on variance decompositions from vector autoregressions (VARs), as in Diebold and Yilmaz (2014). Those VARs are, however, typically identified using full orthogonalization (Sims, 1980), or no orthogonalization (Koop, Pesaran, and Potter, 1996; Pesaran and Shin, 1998), which, although useful, are special and extreme cases of a more general framework that we develop in this paper.
In particular, we allow network nodes to be connected in “clusters”, such as asset classes, industries, regions, etc., where shocks are orthogonal across clusters (Sims style orthogonalized identification) but
correlated within clusters (Koop-Pesaran-Potter-Shin style generalized identification), so that the ordering
of network nodes is relevant across clusters but irrelevant within clusters. After developing the clustered
connectedness framework, we apply it in a detailed empirical exploration of sixteen country equity markets
spanning three global regions.

Dual format:

ESSEC Paris La Défense (CNIT), Room TBA, and via Zoom, please click here .