Network, Market, and Book-Based Systemic Risk Rankings

Tinbergen Institute Discussion Paper 16-074/IV

14 Pages Posted: 9 Sep 2016

See all articles by Michiel van de Leur

Michiel van de Leur

Vrije Universiteit Amsterdam, School of Business and Economics

Andre Lucas

Vrije Universiteit Amsterdam; Tinbergen Institute

Date Written: September 7, 2016

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 first show that SIFIRank is empirically equivalent to a ranking based on average pairwise stock correlations. Next, we find that correlation based network measures still appear to complement currently available systemic risk ranking methods based on book or market values. A further analytical investigation, however, 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: Systemically Important Financial Institutions (SIFI), European banking sector, systemic risk rankings, network based risk measures

JEL Classification: G01, G21

Suggested Citation

van de Leur, Michiel and Lucas, Andre, Network, Market, and Book-Based Systemic Risk Rankings (September 7, 2016). Tinbergen Institute Discussion Paper 16-074/IV, Available at SSRN: https://ssrn.com/abstract=2836382 or http://dx.doi.org/10.2139/ssrn.2836382

Michiel Van de Leur (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Andre Lucas

Vrije Universiteit Amsterdam ( email )

SBE/EDS, De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31 20 598 6039 (Phone)
+31 20 598 6020 (Fax)

HOME PAGE: http://personal.vu.nl/a.lucas

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