A Matrix-Variate t Model for Networks

Monica Billio; Roberto Casarin; Michele Costola; Matteo Iacopini

doi:10.3389/frai.2021.674166

A Matrix-Variate t Model for Networks

Monica Billio^*
, Roberto Casarin
, Michele Costola
, Matteo Iacopini

^*Corresponding author for this work

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

Networks represent a useful tool to describe relationships among financial firms and network analysis has been extensively used in recent years to study financial connectedness. An aspect, which is often neglected, is that network observations come with errors from different sources, such as estimation and measurement errors, thus a proper statistical treatment of the data is needed before network analysis can be performed. We show that node centrality measures can be heavily affected by random errors and propose a flexible model based on the matrix-variate t distribution and a Bayesian inference procedure to de-noise the data. We provide an application to a network among European financial institutions.

Original language	English
Article number	674166
Pages (from-to)	1-7
Number of pages	7
Journal	Frontiers in Artificial Intelligence
Volume	4
Issue number	May
DOIs	https://doi.org/10.3389/frai.2021.674166
Publication status	Published - May 2021

Bibliographical note

Funding Information:
We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca’ Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET – Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Skłodowska-Curie Actions, European

Funding Information:
We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca' Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET ? Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Sk?odowska-Curie Actions, European Union, Seventh Framework Program HORIZON 2020 under REA grant agreement no. 887220.

Publisher Copyright:
© Copyright © 2021 Billio, Casarin, Costola and Iacopini.

Funding

We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca’ Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET – Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Skłodowska-Curie Actions, European We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca' Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET ? Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Sk?odowska-Curie Actions, European Union, Seventh Framework Program HORIZON 2020 under REA grant agreement no. 887220.

Funders	Funder number
H2020 Marie Skłodowska-Curie Actions
Research Executive Agency
Seventh Framework Program HORIZON 2020
European Commission
Università Ca' Foscari di Venezia
Venice Centre for Risk Analytics
SCSCF
Horizon 2020 Framework Programme	887220
Italian Ministry MIUR	2017TA7TYC

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 16 Peace, Justice and Strong Institutions

Keywords

62F15
62M10
65C05
Bayesian
C11
C32
C58
financial markets
matrix-variate distributions
networks
t distribution

Access to Document

10.3389/frai.2021.674166

Persistent URL (handle)

Persistent link

Cite this

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title = "A Matrix-Variate t Model for Networks",

abstract = "Networks represent a useful tool to describe relationships among financial firms and network analysis has been extensively used in recent years to study financial connectedness. An aspect, which is often neglected, is that network observations come with errors from different sources, such as estimation and measurement errors, thus a proper statistical treatment of the data is needed before network analysis can be performed. We show that node centrality measures can be heavily affected by random errors and propose a flexible model based on the matrix-variate t distribution and a Bayesian inference procedure to de-noise the data. We provide an application to a network among European financial institutions.",

keywords = "62F15, 62M10, 65C05, Bayesian, C11, C32, C58, financial markets, matrix-variate distributions, networks, t distribution",

author = "Monica Billio and Roberto Casarin and Michele Costola and Matteo Iacopini",

note = "Funding Information: We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca{\textquoteright} Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET – Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Sk{\l}odowska-Curie Actions, European Funding Information: We thank Maurizio La Mastra for excellent research assistance. This research used the SCSCF and the HPC multiprocessor cluster systems provided by the Venice Centre for Risk Analytics (VERA) at the University Ca' Foscari of Venice. MB, RC, and MC acknowledge financial support from the Italian Ministry MIUR under the PRIN project Hi-Di NET ? Econometric Analysis of High Dimensional Models with Network Structures in Macroeconomics and Finance (grant agreement no. 2017TA7TYC). MI acknowledges financial support from the Marie Sk?odowska-Curie Actions, European Union, Seventh Framework Program HORIZON 2020 under REA grant agreement no. 887220. Publisher Copyright: {\textcopyright} Copyright {\textcopyright} 2021 Billio, Casarin, Costola and Iacopini.",

year = "2021",

month = may,

doi = "10.3389/frai.2021.674166",

language = "English",

volume = "4",

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journal = "Frontiers in Artificial Intelligence",

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PY - 2021/5

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A Matrix-Variate t Model for Networks

Abstract

Bibliographical note

Funding

UN SDGs

Keywords

Access to Document

Persistent URL (handle)

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Cite this