Networks represent a useful tool to describe relationships among financial firms and network analysis has been extensively used in recent years to study financial connectedness. An aspect, which is often neglected, is that network observations come with errors from different sources, such as estimation and measurement errors, thus a proper statistical treatment of the data is needed before network analysis can be performed. We show that node centrality measures can be heavily affected by random errors and propose a flexible model based on the matrix-variate t distribution and a Bayesian inference procedure to de-noise the data. We provide an application to a network among European financial institutions.

A Matrix-Variate t Model for Networks

Billio M.;Casarin R.;Costola M.;Iacopini M.
2021-01-01

Abstract

Networks represent a useful tool to describe relationships among financial firms and network analysis has been extensively used in recent years to study financial connectedness. An aspect, which is often neglected, is that network observations come with errors from different sources, such as estimation and measurement errors, thus a proper statistical treatment of the data is needed before network analysis can be performed. We show that node centrality measures can be heavily affected by random errors and propose a flexible model based on the matrix-variate t distribution and a Bayesian inference procedure to de-noise the data. We provide an application to a network among European financial institutions.
File in questo prodotto:
File Dimensione Formato  
frai-04-674166.pdf

accesso aperto

Descrizione: fg
Tipologia: Documento in Post-print
Licenza: Accesso gratuito (solo visione)
Dimensione 1.03 MB
Formato Adobe PDF
1.03 MB Adobe PDF Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3752113
Citazioni
  • ???jsp.display-item.citation.pmc??? 0
  • Scopus 1
  • ???jsp.display-item.citation.isi??? 0
social impact