We construct a network volatility index (NetVIX) via market interconnectedness and volatilities to measure global market risk. The NetVIX multiplicatively decomposes into a network volatility effect and a network contagion effect. It also additively decomposes into volatility contributions of each market. We apply our measure to study the relationship between the interconnectedness among 20 major stock markets and global market risks over the last two decades. We show that the NetVIX has a strong relationship with the VIX index, and therefore able to reliably signal changes in global market volatility. We also show that while the NetVIX tracks to some extent the VIX, it provides much more information about the level of volatility and contagion effects in financial markets. The result shows that during crisis periods, particularly the tech bubble, the global financial crisis, and the Covid-19 pandemic, stock market interconnectedness contributes to global market turmoil by amplifying average market volatility with over 400 percent multiplier. Also during crisis times, the level of risk is relatively higher and more persistent in the US and German markets, which implies market losses for investors with long exposures. The results also reveal that the highest risk-contributing markets are the US, Brazil, Hong Kong, France, and Germany. (c) 2022 Elsevier B.V. All rights reserved.
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Fed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USAFed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USA
Adrian, Tobias
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Brunnermeier, Markus K.
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Princeton Univ, Dept Econ, Bendheim Ctr Finance, Princeton, NJ 08544 USA
NBER, CEPR, Cambridge, MA 02138 USA
CESIfo, Munich, GermanyFed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USA
机构:
Bank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, SwitzerlandBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
Avdjiev, S.
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Giudici, P.
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Univ Pavia, CADS, Dept Econ & Management, Human Technopole, Pavia, ItalyBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
Giudici, P.
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Spelta, A.
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Univ Pavia, CADS, Dept Econ & Management, Human Technopole, Pavia, ItalyBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
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Bank England, London, EnglandUCL, Dept Comp Sci, London, England
Bardoscia, Marco
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Caccioli, Fabio
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UCL, Dept Comp Sci, London, England
London Sch Econ, Syst Risk Ctr, London, England
London Math Lab, London, EnglandUCL, Dept Comp Sci, London, England
Caccioli, Fabio
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D'Errico, Marco
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European Cent Bank, European Syst Risk Board Secretariat, Frankfurt, GermanyUCL, Dept Comp Sci, London, England
机构:
IMT Sch Adv Studies Lucca, Lucca, Italy
Sapienza Univ Roma, Dipartimento Fis, Ist Sistemi Complessi CNR UoS Sapienza, Rome, Italy
Univ Venezia Ca Foscari, European Ctr Living Technol, Venice, Italy
London Inst Math Sci, London, EnglandUCL, Dept Comp Sci, London, England
机构:
Fed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USAFed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USA
Adrian, Tobias
;
Brunnermeier, Markus K.
论文数: 0引用数: 0
h-index: 0
机构:
Princeton Univ, Dept Econ, Bendheim Ctr Finance, Princeton, NJ 08544 USA
NBER, CEPR, Cambridge, MA 02138 USA
CESIfo, Munich, GermanyFed Reserve Bank New York, Res & Stat Grp, 33 Liberty St, New York, NY 10045 USA
机构:
Bank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, SwitzerlandBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
Avdjiev, S.
;
Giudici, P.
论文数: 0引用数: 0
h-index: 0
机构:
Univ Pavia, CADS, Dept Econ & Management, Human Technopole, Pavia, ItalyBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
Giudici, P.
;
Spelta, A.
论文数: 0引用数: 0
h-index: 0
机构:
Univ Pavia, CADS, Dept Econ & Management, Human Technopole, Pavia, ItalyBank Int Settlements, Monetary & Econ Dept, Human Technopole, Basel, Switzerland
机构:
Bank England, London, EnglandUCL, Dept Comp Sci, London, England
Bardoscia, Marco
;
Caccioli, Fabio
论文数: 0引用数: 0
h-index: 0
机构:
UCL, Dept Comp Sci, London, England
London Sch Econ, Syst Risk Ctr, London, England
London Math Lab, London, EnglandUCL, Dept Comp Sci, London, England
Caccioli, Fabio
;
D'Errico, Marco
论文数: 0引用数: 0
h-index: 0
机构:
European Cent Bank, European Syst Risk Board Secretariat, Frankfurt, GermanyUCL, Dept Comp Sci, London, England
机构:
IMT Sch Adv Studies Lucca, Lucca, Italy
Sapienza Univ Roma, Dipartimento Fis, Ist Sistemi Complessi CNR UoS Sapienza, Rome, Italy
Univ Venezia Ca Foscari, European Ctr Living Technol, Venice, Italy
London Inst Math Sci, London, EnglandUCL, Dept Comp Sci, London, England