Journal
JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY
Volume 45, Issue -, Pages 42-59Publisher
ELSEVIER
DOI: 10.1016/j.intfin.2016.05.008
Keywords
Systemic risk measurement; Entropy measures; Bayesian inference; Early warning indicator; Banking crisis
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Funding
- European Union [SYRTO-SSH-2012-320270]
- Institut Europlace of Finance
- Global Risk Institute in Financial Services
- Louis Bachelier Institute, Systemic Risk Research Initiative
- Italian Ministry of Education, University and Research (MIUR) PRIN grant MISURA
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We analyze the time evolution of systemic risk in Europe by using different entropy measures and construct a new early warning indicator for banking crises. The analysis is based on the cross-sectional distribution of systemic risk measures such as Marginal Expected Shortfall, Delta CoVaR and network connectedness. These measures are conceived at a single institution level for the financial industry in the Euro area and capture different features of the financial market during periods of stress. The empirical analysis shows the forecasting ability of entropy measures in predicting banking crises. (C) 2016 Elsevier B.V. All rights reserved.
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