COVID-19 Spreading in Financial Networks: A Semiparametric Matrix Regression Model

33 Pages Posted: 12 Jan 2021

See all articles by Monica Billio

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Michele Costola

Ca' Foscari University of Venice

Matteo Iacopini

VU University Amsterdam - Department of Econometrics

Date Written: January 8, 2021

Abstract

Network models represent a useful tool to describe the complex set of financial relationships among heterogeneous firms in the system. In this paper, we propose a new semiparametric model for temporal multilayer causal networks with both intra- and inter-layer connectivity. A Bayesian model with a hierarchical mixture prior distribution is assumed to capture heterogeneity in the response of the network edges to a set of risk factors including the European COVID-19 cases. We measure the financial connectedness arising from the interactions between two layers defined by stock returns and volatilities. In the empirical analysis, we study the topology of the network before and after the spreading of the COVID-19 disease.

Keywords: Multilayer networks, financial markets, COVID-19

JEL Classification: C11, C58, G10

Suggested Citation

Billio, Monica and Casarin, Roberto and Costola, Michele and Iacopini, Matteo, COVID-19 Spreading in Financial Networks: A Semiparametric Matrix Regression Model (January 8, 2021). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 05/WP/2021, Available at SSRN: https://ssrn.com/abstract=3764443 or http://dx.doi.org/10.2139/ssrn.3764443

Monica Billio (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics ( email )

San Giobbe 873/b
Venice, 30121
Italy
+39 030.298.91.49 (Phone)
+39 030.298.88.37 (Fax)

HOME PAGE: http://sites.google.com/view/robertocasarin

Michele Costola

Ca' Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

Matteo Iacopini

VU University Amsterdam - Department of Econometrics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

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