Bastien Buchwalter, Francis X. Diebold, Kamil Yilmaz
arXiv 5 Sep 2026 · Econometrics
arXiv:2609.05792 · PDF · Extracted main text
We extend the clustered connectedness framework of Buchwalter, Diebold and Yilmaz (2026) in two complementary directions that improve the robustness and interpretability of cross-cluster connectedness. First, we develop a diagnostic for residual ordering sensitivity by characterizing the distribution of cluster-level net connectedness across all admissible identification orderings and, in particular, by pairing first- and last-position orderings while holding fixed the relative ordering of all other clusters. Second, we introduce a dedicated cluster of control variables to absorb variation associated with observed common macro-financial factors while preserving the computational scalability of the clustered framework. The control cluster is fixed first, and bank innovations are residualized with respect to it before the remaining bank clusters are permuted and orthogonalized as usual, leaving the number of admissible bank-cluster identification strategies unchanged. Under the maintained recursive assumption that control-cluster innovations are contemporaneously exogenous to bank-cluster innovations, the remaining cross-cluster connectedness among the bank clusters can be interpreted as bank-to-bank transmission net of those observed common-factor shocks. We apply the methodology to seventy-one global banks grouped into seven regional clusters over 2003--2024. The treatment of common macro-financial factors materially affects both system-wide cross-group connectedness and cluster-level net positions. Placing the controls in a dedicated first cluster also substantially reduces paired first-versus-last ordering sensitivity across all seven bank clusters, with especially large reductions for the United States and the European clusters.
appendix boundary found by none_found · 100% of the source is main text. Read the extracted text to check this.
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 | Buchwalter, Diebold, and Ylmaz (2026) Clustered Network Connectedness: A New Measurement Framework with Application to Global Equity Markets, Journal of Econometrics\… | 0.843 | 3 | 3 | 100% |
| BarunikKrehlik2018 | unmatched citation key BarunikKrehlik2018 | 0.405 | 1 | 1 | 100% |
| 3 | Diebold and Ylmaz (2023) On the Past, Present, and Future of the Diebold–Ylmaz Approach to Dynamic Network Connectedness, Journal of Econometrics\/, 234,… | 0.405 | 1 | 1 | 100% |
| 4 | Demirer, Diebold, Liu, and Ylmaz (2018) Estimating Global Bank Network Connectedness, Journal of Applied Econometrics\/, 33, 1–15 | 0.405 | 1 | 1 | 100% |
| 5 | Diebold and Ylmaz (2009) Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets, Economic Journal\/, 119,… | 0.405 | 1 | 1 | 100% |
| 6 | Diebold and Ylmaz (2012) Better to Give Than to Receive: Predictive Directional Measurement of Volatility Spillovers, International Journal of Forecastin… | 0.405 | 1 | 1 | 100% |
| 7 | Francis, Hansen, and Tong (2026) Principled Identification of Structural Dynamic Models, Working Paper 34623, National Bureau of Economic Research, Cambridge, MA | 0.405 | 1 | 1 | 100% |
| 8 | Garman and Klass (1980) On the Estimation of Security Price Volatilities from Historical Data, Journal of Business\/, 53, 67–78 | 0.405 | 1 | 1 | 100% |
| 9 | Jacomy, Venturini, Heymann, and Bastian (2014) ForceAtlas2, a Continuous Graph Layout Algorithm for Handy Network Visualization Designed for the Gephi Software, PLoS ONE\/, 9,… | 0.405 | 1 | 1 | 100% |
| 10 | Koop, Pesaran, and Potter (1996) Impulse Response Analysis in Nonlinear Multivariate Models, Journal of Econometrics\/, 74, 119–147 | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 12 scored citations. 1 of these could not be matched to a bibliography entry, so only the citation key is shown.