Network connectedness and China's systemic financial risk contagion——An analysis based on big data

Fan, Xiaoyun; Wang, Yedong; Wang, Daoping

doi:10.1016/j.pacfin.2020.101322

Cited by 32 publications

(15 citation statements)

References 18 publications

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“…However, there is a substantial challenge in these works: Investor behavior is indirectly measured. Indirect proxies for investor behavior such as the net stock purchase ( Baker & Wurgler, 2006 ) and dividend premium ( Yang et al, 2021 ) are hard to timely and accurately reflect the real behavior of investors ( Chundakkadan and Nedumparambil, 2021 , Cookson and Niessner, 2020 , Fan et al, 2021 , Gu and Kurov, 2020 ). As an alternative behavior measurement, the direct proxy variable based on online search engines shows the information flow in financial markets more authentic and comprehensive ( Hsieh et al, 2020 ), and it has been widely used in asset pricing and market efficiency ( Da et al, 2015 , Gao et al, 2020 , Gu and Kurov, 2020 , Hsieh et al, 2020 ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…In this subsection, we examine whether pandemic-driven financial contagion can be explained by investor behavior in the following regression:

where

refers the pandemic-driven contagion of country

at time

and is defined as the sum of the tail dependence between country

and its contagious countries ( Fan et al, 2021 ).

corresponds to the proxy variables of investor behavior including investor attention (country attention, local attention, and global attention), investor sentiment, and investor fear.…”

Section: Empirical Analysismentioning

confidence: 99%

See 1 more Smart Citation

Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

Wang

Jin

2022

International Review of Financial Analysis

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Section: Literature Reviewmentioning

confidence: 99%

“…In this subsection, we examine whether pandemic-driven financial contagion can be explained by investor behavior in the following regression:

where

refers the pandemic-driven contagion of country

at time

and is defined as the sum of the tail dependence between country

and its contagious countries ( Fan et al, 2021 ).

corresponds to the proxy variables of investor behavior including investor attention (country attention, local attention, and global attention), investor sentiment, and investor fear.…”

Section: Empirical Analysismentioning

confidence: 99%

Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

Wang

Jin

2022

International Review of Financial Analysis

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“…The increasing financial penetration among countries has proven to be double-edged, which not only assists in the optimization of investment portfolios and reduction of local risks, but also induces market co-movements and consequently raises the likelihood of risk contagion across economies [1]. The repercussions of contagion are at the core of systemic risk, which depends considerably on the carrier of connectedness among financial institutions or financial markets [2,3]. Especially the recent financial crises have highlighted the role of market connectedness in triggering systemic risk [4].…”

Section: Introductionmentioning

confidence: 99%

“…Another strand of literature, which addresses the second research question, relates to the quantification of the spillover channels across markets. Scholars seek to explain the influential factors that amplify or mitigate volatility spillover in terms of equity market importance, development and liquidity [10,[21][22][23], investment behaviors and macroeconomic fundamentals [1,20], capital account flow [24,25], financial crisis [20,26,27], and financial institution linkages [3,28]. For instance, Baumöhl et al [10] used spatial regression to model the volatility spillover network of 40 developed, emerging, and frontier stock markets between 2006 and 2014 to identify escalating magnitude of spillovers with increasing market size, market liquidity, and economic openness.…”

Section: Introductionmentioning

confidence: 99%

A Weighted and Directed Perspective of Global Stock Market Connectedness: A Variance Decomposition and GERGM Framework

Zhang

Chen

2020

Sustainability

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The financial penetration accelerated by economic globalization and financial liberalization has inevitably induced market co-movement and the rising likelihood of cross-market risk contagion. An in-depth analysis concerning the carrier of risk contagion, i.e., market connectedness network, is of great significance for risk management. This study aims to establish a holistic framework to shed light on the topological dynamics and the evolving channels of connectedness network among 24 major stock markets in two aspects; namely, a dynamic perspective juxtaposing crisis and non-crisis periods, and a contrasting perspective between risk absorption and risk spillover. To this end, a methodological framework of the generalized variance decomposition and generalized exponential random graph models (GERGM) is constructed, in which the former method formulates the asymmetric causal relationships of stock return volatility among countries and regions into weighted and directed networks, and the latter method simulates and models the varying attributes of different contagion channels in the formation of tie directions and weights. The results indicate that the global stock market network reflects typical event-driven and time-varying characteristics. Countries and regions that rely heavily on foreign direct investment (FDI) are more likely to absorb risks, especially during the post-crisis recovery period, while countries and regions with higher foreign portfolio holdings are more inclined to risk spillover, especially during the subprime crisis. Geographical proximity and bilateral trade volume amplify risk contagion, whereas foreign exchange reserve holding improves robustness. This holistic framework allows the identification of the direction and intensity of risk contagion and the clarification of priority of risk transmission channels in different stages, thus reducing the uncertainty of risk management and providing insights into the macro-prudential managements toward sustainable economic development.

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“…In addition, building on these approaches, numerous of improvements have been made to make the measurement more accurate [64,65]. More recent approaches to measure risk contagion include event studies [66], Markov methods [67], co-kurtosis model [68], and big data analysis [69].…”

Section: Corporate Risk Contagionmentioning

confidence: 99%

Entrepreneurs’ Social Network and Corporate Risk Contagion: A Dynamic Evaluation and Simulation Approach

Yang

Qian

2020

Complexity

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Interactions of entrepreneurs through social networks provide an available path for corporate risk contagions. However, the issue how entrepreneurs’ social networks influence on corporate risk contagion is still received limited attention from scholars. In this study, a framework is proposed to describe entrepreneurs’ interaction and corporate value creation. The main results of multiagent simulations indicate the following. First, either weak ties or strong connections of social networks can enhance density of corporate risk contagion. However, only strong connections can be moderated by entrepreneurs’ risk preference. Second, weak ties improve risk exposure of individual corporations, while strong connections may probably decrease systematical risk of the market. Third, weak ties are important for mature corporations to achieve business success. However, for startups, strong connections are more valuable to maintain. The findings of this study not only provide theoretical support from some widely accepted economic phenomenon but also provide explanations for conflicting results from some previous literatures.

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Network connectedness and China's systemic financial risk contagion——An analysis based on big data

Cited by 32 publications

References 18 publications

Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

A Weighted and Directed Perspective of Global Stock Market Connectedness: A Variance Decomposition and GERGM Framework

Entrepreneurs’ Social Network and Corporate Risk Contagion: A Dynamic Evaluation and Simulation Approach

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