Date: Wednesday, 12 March 2025, at 2.30pm (CET)

Dual format: ESSEC Paris La Défense (CNIT), Room TBA
and via Zoom, please click here

Network connections, both across and within markets, are central in countless economic contexts. In recent decades, a large literature has developed and applied flexible methods for measuring network connectedness and its evolution, based on variance decompositions from vector autoregressions (VARs), as in Diebold and Yilmaz (2014). Those VARs are, however, typically identified using full orthogonalization (Sims, 1980), or no orthogonalization (Koop, Pesaran, and Potter, 1996; Pesaran and Shin, 1998), which, although useful, are special and extreme cases of a more general framework that we develop in this paper. In particular, we allow network nodes to be connected in “clusters”, such as asset classes, industries, regions, etc., where shocks are orthogonal across clusters (Sims style orthogonalized identification) but correlated within clusters (Koop-Pesaran-Potter-Shin style generalized identification), so that the ordering of network nodes is relevant across clusters but irrelevant within clusters. After developing the clustered connectedness framework, we apply it in a detailed empirical exploration of sixteen country equity markets spanning three global regions.

Kind regards,
Jeremy Heng, Olga Klopp, Roberto Reno, Marie Kratz and Riada Djebbar (Singapore Actuarial Society - ERM)