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Contagion and tail risk in complex financial networks

Abduraimova, Kumushoy

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Abstract

New contagion measures based on theories of copula, heavy-tailed distributions and networks are introduced. The measures are applied to study international stock markets contagion during the Global Financial Crisis 2008. Having declined post-crisis, the contagion risk remains above its pre-crisis level for both advanced and emerging economies. A sub-network analysis of contagion shows that the shock propagated mainly from core to periphery during the crisis. We propose an instrumental variable regression approach to deal with a potential endogeneity problem in the analysis of the contagion measures as determinants of tail risk. Endogeneity might arise as both contagion measures and tail indices are themselves estimated. The obtained results are statistically significant and suggest that more contagion-central countries tend to be less prone to tail risk.

Citation

Abduraimova, K. (2022). Contagion and tail risk in complex financial networks. Journal of Banking and Finance, 143, Article 106560. https://doi.org/10.1016/j.jbankfin.2022.106560

Journal Article Type Article
Acceptance Date May 28, 2022
Online Publication Date Jun 10, 2022
Publication Date 2022-08
Deposit Date Jun 24, 2022
Publicly Available Date Jun 24, 2022
Journal Journal of Banking & Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 143
Article Number 106560
DOI https://doi.org/10.1016/j.jbankfin.2022.106560
Public URL https://durham-repository.worktribe.com/output/1200179

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Publisher Licence URL
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
This article is available under the Creative Commons CC-BY-NC-ND license and permits non-commercial use of the work as published, without adaptation or alteration provided the work is fully attributed.





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