Tuesday, September 2, 2014

Financial and Macroeconomic Connectedness website is up today !!!

I started this blog more than two years ago. At the time my aim was to build the Financial and Macroeconomic Connectedness (FandMC, for short) website and use this blog to analyze important developments in financial markets around the world as revealed by applications of the Diebold-Yilmaz Connectedness Index (DYCI) methodology.  The website is finally up thanks to the hardwork of my student/assistant/coauthor Mert Demirer.

At the moment, the FandMC website presents the static (full sample) and dynamic connectedness analyses for global stock, bond, foreign exchange and CDS markets.  The website aims to provide academics and policy makers with a powerful tool to analyze how return or volatility shocks to individual assets/markets other assets/markets in a country or around the world.  If you are not already familiar with the DYCI framework I would recommend that you have a look at our Journal of Econometrics (DY 2014) paper listed in the Research section of the website.

In 2014, with the help of shrinkage techniques, such as lasso and elastic net, we have expanded the DYCI framework from small to large scale network analysis.  Three of the four (excluding bonds) financial connectedness analyses presented in the Indices section are estimated using the elastic net procedure.  As the dimension of the network increases, the connectedness analysis through tables becomes rather difficult.  The volatility connectedness analysis of Bond market Thanks to Gephi, a powerful network graphical display program, we can now generate network graphs for the full sample (“static network) and for each instance in our dynamic analysis. 

Obviously it is impossible to create network graphs for every day, but from now on we will try to create network graphics that display the connectedness of assets/markets before, on or after important dates, such as September 15, 2008, that witnessed the bankruptcy announcement of Lehman Brothers. To give an example, in our dynamic volatility connectedness index graph for global stock markets, we highlighted four days. When you click on letter C you will see the network graphics that show how volatility shocks spread among the major stock markets of the world on September 25, 2008, ten days after Lehman’s collapse.  
In addition to the static network graphs,  FandMC website presents graphs of directional connectedness indices (to, from and net) for each asset/market that allows for the dynamic analysis of connectedness in financial markets. The displayed graphs are small, but by clicking the enlarge button it can be viewed quite easily.  Furthermore, all graphs in our website can be printed or downloaded.  The data  underlying the static and dynamic connectedness graphs can be download from the Data section.

All in all, we have tried to include as much as possible in this first run of the FandMC  website.  We will continue building and developing the website further.  In this endeavor we welcome your comments, and suggestions. 

1 comment:

  1. Dear Mr.Yilmaz,
    Thank you very much for making this blog available.
    I have managed to compute and graph both standard (Diebold and Yilmaz, 2009) and generalised (Diebold and Yilmaz, 2011) spillover indices after calculate the connectedness table on Rats software. However, I am having a difficulty in getting the values and figures for both gross and net directional To/From indices.
    I would be most grateful if you could please advise on what can I do to compute the directional measures and figures and to import the connectedness table on Gephi?
    Kindly Regards