Network, market, and book-based systemic risk rankings

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

doi:10.1016/j.jbankfin.2017.02.003

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 Journal › Article › Academic › peer-review

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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 language	English
Pages (from-to)	84-90
Number of pages	7
Journal	Journal of Banking and Finance
Volume	78
Early online date	10 Feb 2017
DOIs	https://doi.org/10.1016/j.jbankfin.2017.02.003
Publication status	Published - May 2017

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Keywords

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

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10.1016/j.jbankfin.2017.02.003

Network, market, and book-based systemic risk rankingsFinal published version, 1.16 MBLicence: Article 25fa Dutch Copyright Act

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title = "Network, market, and book-based systemic risk rankings",

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.",

keywords = "European banking sector, Network based risk measures, Systemic risk ranking, Systemically important financial institutions (SIFI)",

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year = "2017",

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doi = "10.1016/j.jbankfin.2017.02.003",

language = "English",

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T1 - Network, market, and book-based systemic risk rankings

AU - van de Leur, Michiel C W

AU - Lucas, André

AU - Seeger, Norman J.

PY - 2017/5

Y1 - 2017/5

N2 - 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.

AB - 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.

KW - European banking sector

KW - Network based risk measures

KW - Systemic risk ranking

KW - Systemically important financial institutions (SIFI)

UR - https://www.scopus.com/pages/publications/85013230435

UR - https://www.scopus.com/pages/publications/85013230435#tab=citedBy

U2 - 10.1016/j.jbankfin.2017.02.003

DO - 10.1016/j.jbankfin.2017.02.003

M3 - Article

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SN - 0378-4266

VL - 78

SP - 84

EP - 90

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

ER -

Network, market, and book-based systemic risk rankings

Abstract

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