Persistence in Financial Connectedness and Systemic Risk

2020/07/14 by Jozef Baruník, Barunik, Jozef, Michael Ellington +1
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #Econometrics (econ.EM) #FOS: Economics and business #Financial Risk and Volatility Modeling #Market Dynamics and Volatility

paper · pdf · doi:10.48550/arxiv.2007.07842

openalex publication_date 2020/07/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

This paper characterises dynamic linkages arising from shocks with heterogeneous degrees of persistence. Using frequency domain techniques, we introduce measures that identify smoothly varying links of a transitory and persistent nature. Our approach allows us to test for statistical differences in such dynamic links. We document substantial differences in transitory and persistent linkages among US financial industry volatilities, argue that they track heterogeneously persistent sources of systemic risk, and thus may serve as a useful tool for market participants.

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