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Market Risk, Connectedness and Turbulence: A Comparison of 21st Century Financial Crises

Author

Listed:
  • Daniel Felix Ahelegbey

    (Università di Pavia)

  • Paolo Giudici

    (Università di Pavia)

Abstract

We construct a network-based turbulence score that proves useful for analyzing the relationship between financial interconnectedness, and global market risk, and for identifying systemically important markets, with the highest contribution to financial turbulence. We apply our measure to study the integration among the major stock markets over the first two decades of the 21st century, particularly during the tech, sub-prime, and ongoing COVID-19 crises. The result shows that the interconnectedness of the markets amplifies initial global market risks (on average almost four times), to cause financial turbulence. We also found evidence that the United States is central to global market turbulence, followed by Brazil, France, Hong Kong, and Germany.

Suggested Citation

  • Daniel Felix Ahelegbey & Paolo Giudici, 2020. "Market Risk, Connectedness and Turbulence: A Comparison of 21st Century Financial Crises," DEM Working Papers Series 188, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0188
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Ping & Yin, Shiqi & Sha, Yezhou, 2023. "Global systemic risk dynamic network connectedness during the COVID-19: Evidence from nonlinear Granger causality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    2. Fatemeh Mojtahedi & Seyed Mojtaba Mojaverian & Daniel F. Ahelegbey & Paolo Giudici, 2020. "Tail Risk Transmission: A Study of the Iran Food Industry," Risks, MDPI, vol. 8(3), pages 1-17, July.
    3. Ahelegbey, Daniel Felix & Giudici, Paolo & Hashem, Shatha Qamhieh, 2021. "Network VAR models to measure financial contagion," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    Centrality; COVID-19; Density; Financial Crises; Financial Networks; VAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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