Cross-border Portfolio Investment Networks and Indicators for Financial Crises

Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial system and the interdependence of financial markets, respectiv...

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Main Authors:	Joseph, Andreas C., Joseph, Stephan E., Chen, Guanrong
Format:	Online
Language:	English
Published:	Nature Publishing Group 2014
Online Access:	https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3918927/

id	pubmed-3918927
recordtype	oai_dc
spelling	pubmed-39189272014-02-10 Cross-border Portfolio Investment Networks and Indicators for Financial Crises Joseph, Andreas C. Joseph, Stephan E. Chen, Guanrong Article Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial system and the interdependence of financial markets, respectively. Two early-warning indicators for financial crises are identified: First, the algebraic connectivity of the equity securities network, as a measure for structural robustness, drops close to zero already in 2005, while there is an over-representation of high-degree off-shore financial centres among the countries most-related to this observation, suggesting an investigation of such nodes with respect to the structural stability of the global financial system. Second, using a phenomenological model, the edge density of the debt securities network is found to describe, and even forecast, the proliferation of several over-the-counter-traded financial derivatives, most prominently credit default swaps, enabling one to detect potentially dangerous levels of market interdependence and systemic risk. Nature Publishing Group 2014-02-10 /pmc/articles/PMC3918927/ /pubmed/24510060 http://dx.doi.org/10.1038/srep03991 Text en Copyright © 2014, Macmillan Publishers Limited. All rights reserved http://creativecommons.org/licenses/by-nc-sa/3.0/ This work is licensed under a Creative Commons Attribution-NonCommercial-ShareALike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/
repository_type	Open Access Journal
institution_category	Foreign Institution
institution	US National Center for Biotechnology Information
building	NCBI PubMed
collection	Online Access
language	English
format	Online
author	Joseph, Andreas C. Joseph, Stephan E. Chen, Guanrong
spellingShingle	Joseph, Andreas C. Joseph, Stephan E. Chen, Guanrong Cross-border Portfolio Investment Networks and Indicators for Financial Crises
author_facet	Joseph, Andreas C. Joseph, Stephan E. Chen, Guanrong
author_sort	Joseph, Andreas C.
title	Cross-border Portfolio Investment Networks and Indicators for Financial Crises
title_short	Cross-border Portfolio Investment Networks and Indicators for Financial Crises
title_full	Cross-border Portfolio Investment Networks and Indicators for Financial Crises
title_fullStr	Cross-border Portfolio Investment Networks and Indicators for Financial Crises
title_full_unstemmed	Cross-border Portfolio Investment Networks and Indicators for Financial Crises
title_sort	cross-border portfolio investment networks and indicators for financial crises
description	Cross-border equity and long-term debt securities portfolio investment networks are analysed from 2002 to 2012, covering the 2008 global financial crisis. They serve as network-proxies for measuring the robustness of the global financial system and the interdependence of financial markets, respectively. Two early-warning indicators for financial crises are identified: First, the algebraic connectivity of the equity securities network, as a measure for structural robustness, drops close to zero already in 2005, while there is an over-representation of high-degree off-shore financial centres among the countries most-related to this observation, suggesting an investigation of such nodes with respect to the structural stability of the global financial system. Second, using a phenomenological model, the edge density of the debt securities network is found to describe, and even forecast, the proliferation of several over-the-counter-traded financial derivatives, most prominently credit default swaps, enabling one to detect potentially dangerous levels of market interdependence and systemic risk.
publisher	Nature Publishing Group
publishDate	2014
url	https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3918927/
_version_	1612056634993934336

Cross-border Portfolio Investment Networks and Indicators for Financial Crises

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