NetVIX - A Network Volatility Index of Financial Markets

25 Pages Posted: 26 Apr 2020 Last revised: 7 Aug 2021

See all articles by Daniel Felix Ahelegbey

Daniel Felix Ahelegbey

University of Pavia, Department of Economics and Management; Boston University, Department of Mathematics & Statistics

Paolo Giudici

University of Pavia

Date Written: April 24, 2020

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.

Keywords: Centrality, COVID-19, Density, Financial Crises, Financial Networks, VAR

JEL Classification: C11, C15, C51, C52, C55, C58, G01, G12

Suggested Citation

Ahelegbey, Daniel Felix and Giudici, Paolo, NetVIX - A Network Volatility Index of Financial Markets (April 24, 2020). Available at SSRN: https://ssrn.com/abstract=3584510 or http://dx.doi.org/10.2139/ssrn.3584510

Daniel Felix Ahelegbey (Contact Author)

University of Pavia, Department of Economics and Management ( email )

Via San Felice 7
Pavia, Lombardia 27100
Italy
+393888931128 (Phone)

HOME PAGE: http://sites.google.com/site/danielfelixahey/home

Boston University, Department of Mathematics & Statistics ( email )

111 Cummington Mall
Boston, MA 02215
United States

Paolo Giudici

University of Pavia ( email )

Via San Felice 7
27100 Pavia, 27100
Italy

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