Non-Alternative Collective Investment Schemes, Connectedness and Systemic Risk

Abstract

This paper analyses the connectedness among non-alternative collective investment schemes and with their underlying securities markets. The results show that non-alternative collective investment schemes should not be taken as important in terms of propagation of shocks and they may play a limited role from a systemic point view, an outcome that may be confirmed by the second main result of the paper. There is not a long run relationship (cointegration) between the connectedness from non-alternative collective schemes with their underlying markets and the financial systemic risk. On the other hand, in the short run, the way that a negative shock in the financial systemic risk causes an increase in the level of connectedness is shown although the opposite cannot be said; a negative shock in the level of connectedness does not cause a rise in the measure of the financial systemic risk.

Keywords: connectedness, investment schemes, UCITS, securities markets, systemic risk

JEL Classification: G23, G18, C53