Bastien Buchwalter, Francis X. Diebold, Kamil Yilmaz
arXiv 21 Feb 2025 · Econometrics · publishedJournal of Econometrics (2026) · 5 citations (OpenAlex)
arXiv:2502.15458 · PDF · DOI · OpenAlex · Extracted main text
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.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Koop, Pesaran, and Potter (1996) Impulse Response Analysis in Nonlinear Multivariate Models, Journal of Econometrics\/, 74, 119–147 | 0.928 | 4 | 3 | 100% |
| 2 | Sims (1980) Macroeconomics and Reality, Econometrica\/, 48, 1–48 | 0.843 | 3 | 3 | 100% |
| 3 | Diebold and Yilmaz (2014) On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms, Journal of Econometrics\/, 1… | 0.843 | 3 | 3 | 100% |
| 4 | Pesaran and Shin (1998) Generalized Impulse Response Analysis in Linear Multivariate Models, Economics Letters\/, 58, 17–29 | 0.644 | 2 | 2 | 100% |
| 5 | Forbes and Rigobon (2002) No Contagion, Only Interdependence: Measuring Stock Market Comovements, Journal of Finance\/, 57, 2223–2261 | 0.644 | 2 | 2 | 100% |
| 6 | Diebold and Yilmaz (2012) Better to Give Than to Receive: Predictive Directional Measurement of Volatility Spillovers, International Journal of Forecastin… | 0.585 | 3 | 1 | 100% |
| 7 | Demirer, Diebold, Liu, and Yilmaz (2018) Estimating Global Bank Network Connectedness, Journal of Applied Econometrics\/, 33, 1–15 | 0.511 | 2 | 1 | 100% |
| 8 | Bonhomme and Manresa (2015) Grouped Patterns of Heterogeneity in Panel Data, Econometrica\/, 83, 625–643 | 0.405 | 1 | 1 | 100% |
| 9 | Bonhomme, Lamadon, and Manresa (2022) Discretizing Unobserved Heterogeneity, Econometrica\/, 90, 625–643 | 0.405 | 1 | 1 | 100% |
| 10 | Brownlees, Gudmundsson, and Lugosi (2022) Community Detection in Partial Correlation Network Models, Journal of Business and Economic Statistics\/, 40, 216–226 | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 28 scored citations.