Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150015
Authors: 
Bonaccolto, Giovanni
Caporin, Massimiliano
Panzica, Roberto Calogero
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper Series 165
Abstract: 
Causality is a widely-used concept in theoretical and empirical economics. The recent financial economics literature has used Granger causality to detect the presence of contemporaneous links between financial institutions and, in turn, to obtain a network structure. Subsequent studies combined the estimated networks with traditional pricing or risk measurement models to improve their fit to empirical data. In this paper, we provide two contributions: we show how to use a linear factor model as a device for estimating a combination of several networks that monitor the links across variables from different viewpoints; and we demonstrate that Granger causality should be combined with quantile-based causality when the focus is on risk propagation. The empirical evidence supports the latter claim.
Subjects: 
granger causality
quantile causality
multi-layer network
network combination
JEL: 
C58
C31
C32
G01
Document Type: 
Working Paper

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