Network, market, and book-based systemic risk rankings

Michiel C W van de Leur, André Lucas*, Norman J. Seeger

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We investigate the information content of stock correlation based network measures for systemic risk rankings, such as SIFIRank (based on Google's PageRank). Using European banking data, we show that SIFIRank is empirically equivalent to a ranking based on average pairwise stock correlations as developed in this paper. The correlation based network measures complement currently available alternative systemic risk ranking methods based on book or market values. A further analytical investigation shows that the value-added appears to be mainly attributable to pairwise cross-sectional heterogeneity rather than to more subtle network relations and feedback loops.

Original languageEnglish
Pages (from-to)84-90
Number of pages7
JournalJournal of Banking and Finance
Volume78
DOIs
Publication statusPublished - 1 May 2017

Keywords

  • European banking sector
  • Network based risk measures
  • Systemic risk ranking
  • Systemically important financial institutions (SIFI)

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