• 0974-4274(PRINT), ISSN NO: 2582-1148(ONLINE)
2

Archive Details

Help Desk

Year 2025 50 Downloads
Volume/Issue/Review Month Volume-XVIII | Issue-II | Jul.-Dec.
Title Measuring Resilience Through Systemic Risk with Reference to Indian Indices
Authors Manik Chand Dey, Dr. Jakki Samir Khan, Dr. Sangeeta Mohanty
Broad area Finance
Abstract This paper studies financial market resilience indirectly through an important indicator; systemic risk. We propose four measures of systemic risk in important indices of Indian capital market using correlation, principal component analysis (PCA), Granger causality test and the regime switching model. We empirically examined daily return data from 2006 to 2010 in two sub-periods. Results of PCA and correlation suggest existence of a substantial degree of interconnectedness and relatively low liquidity during and after crisis period among three indices i.e., among Nifty 50, Nifty 5Yr G sec and Nifty commodities except for the Nifty bank. However, before crisis, Nifty bank has a positive degree of linkage with three indices except Nifty commodities. Result of pairwise Granger causality test implies more asymmetry of information flow across indices post crisis. This may imply a relatively lower degree of resilience of Indian capital market despite of considerable liquidity of Nifty indices in normal period. We found no evidence of sudden regime change from two state MS GARCH model for all the select four indices during the sample period. This may indicate a relatively stable return generating process. This study will have implications for regulators and policymakers.
DOI https://doi.org/10.63340/SAMT/10000001
File
Referenceses

Acharya, V. V., & Richardson, M. P. (Eds.). (2009). Restoring financial stability: how to repair a failed system (Vol. 542). John Wiley & Sons.

Ahmed, S., Coulibaly, B., & Zlate, A. (2017). International financial spillovers to emerging market economies: How important are economic fundamentals?. Journal of International Money and Finance, 76, 133-152.

Allen, F. (2011). Cross-border banking in Europe: implications for financial stability and macroeconomic policies. CEPR.

Allen, F., & Gale, D. (2000). Financial contagion. Journal of political economy, 108(1), 1-33.

Arif, M., Hasan, M., Alawi, S. M., & Naeem, M. A. (2021). COVID-19 and time-frequency connectedness between green and conventional financial markets. Global Finance Journal, 49, 100650.

Bartram, S. M., Brown, G. W., & Hund, J. E. (2007). Estimating systemic risk in the international financial system. Journal of Financial Economics, 86(3), 835-869.

Billio, M., Casarin, R., Costola, M., & Pasqualini, A. (2016). An entropy-based early warning indicator for systemic risk. Journal of International Financial Markets, Institutions and Money, 45, 42-59.

Broto, C., & Lamas, M. (2020). Is market liquidity less resilient after the financial crisis? Evidence for US Treasuries. Economic Modelling, 93, 217-229.

Brunnermeier, M. K., & Oehmke, M. (2013). Bubbles, financial crises, and systemic risk. Handbook of the Economics of Finance, 2, 1221-1288.

Caceres-Santos, J., Rodriguez-Martinez, A., Caccioli, F., & Martinez-Jaramillo, S. (2020). Systemic risk and other interdependencies among banks in Bolivia. Latin American Journal of Central Banking, 1(1-4), 100015.

Chabot, M., Bertrand, J. L., & Thorez, E. (2019). Resilience of United Kingdom financial institutions to major uncertainty: A network analysis related to the Credit Default Swaps market. Journal of Business Research, 101, 70-82.

Cont, R., & Minca, A. (2016). Credit default swaps and systemic risk. Annals of Operations Research, 247, 523-547.

Danielsson, J., & Zigrand, J. P. (2008). Equilibrium asset pricing with systemic risk. Economic Theory, 35, 293-319.

De Bandt, O., & Hartmann, P. (2000). Systemic risk: a survey. Available at SSRN 258430.

Diamond, D. W., & Rajan, R. G. (2005). Liquidity shortages and banking crises. The Journal of finance, 60(2), 615-647.

Di Caro, P. (2017). Testing and explaining economic resilience with an application to Italian regions. Papers in Regional Science, 96(1), 93-114.

Duca, M. L., & Peltonen, T. A. (2013). Assessing systemic risks and predicting systemic events. Journal of Banking & Finance, 37(7), 2183-2195.

El Alaoui, A. O., Dewandaru, G., Rosly, S. A., & Masih, M. (2015). Linkages and co-movement between international stock market returns: Case of Dow Jones Islamic Dubai Financial Market index. Journal of International Financial Markets, Institutions and Money, 36, 53-70.

Elnahass, M., Trinh, V. Q., & Li, T. (2021). Global banking stability in the shadow of Covid-19 outbreak. Journal of International Financial Markets, Institutions and Money, 72, 101322.

Eraydin, A. (2016). Attributes and characteristics of regional resilience: Defining and measuring the resilience of Turkish regions. Regional Studies, 50(4), 600-614.

Fakhfekh, M., Hachicha, N., Jawadi, F., Selmi, N., & Cheffou, A. I. (2016). Measuring volatility persistence for conventional and Islamic banks: An FI-EGARCH approach. Emerging Markets Review, 27, 84-99.

Fong, T. P. W., Sze, A. K. W., & Ho, E. H. C. (2021). Assessing cross-border interconnectedness between shadow banking systems. Journal of International Money and Finance, 110, 102278.

Getmansky, M., Lo, A. W., & Makarov, I. (2004). An econometric model of serial correlation and illiquidity in hedge fund returns. Journal of Financial Economics, 74(3), 529-609.

González-Hermosillo, B., & Hesse, H. (2011). Global market conditions and systemic risk. Journal of Emerging Market Finance, 10(2), 227-252.

Hamilton, J. D. (1989). A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica: Journal of the econometric society, 357-384.

Hart, O., & Zingales, L. (2009). How to avoid a new financial crisis. working paper.

Izzeldin, M., Murado?lu, Y. G., Pappas, V., & Sivaprasad, S. (2021). The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model. International Review of Financial Analysis, 74, 101671.

Lehar, A. (2005). Measuring systemic risk: A risk management approach. Journal of Banking & Finance, 29(10), 2577-2603.

Liu, X. (2017). Measuring systemic risk with regime switching in tails. Economic Modelling, 67, 55-72.

Lo, D. K., & Hall, A. D. (2015). Resiliency of the limit order book. Journal of Economic Dynamics and Control, 61, 222-244.

May, R. M., & Arinaminpathy, N. (2010). Systemic risk: the dynamics of model banking systems. Journal of the Royal Society Interface, 7(46), 823-838.

Pagano, M., Wagner, C., & Zechner, J. (2023). Disaster resilience and asset prices. Journal of Financial Economics, 150(2), 103712.

Patro, D. K., Qi, M., & Sun, X. (2013). A simple indicator of systemic risk. Journal of Financial Stability, 9(1), 105-116.

Saiti, B., Bacha, O. I., & Masih, M. (2016). Testing the conventional and Islamic financial market contagion: evidence from wavelet analysis. Emerging Markets Finance and Trade, 52(8), 1832-1849.

Sanderson, T., Capon, T., & Hertzler, G. (2017). Defining Measuring and Valuing Economic Resilience. Journal of CSIRO-Data61 Australia.

Schuldenzucker, S., Seuken, S., & Battiston, S. (2020). Default ambiguity: Credit default swaps create new systemic risks in financial networks. Management Science, 66(5), 1981-1998.

Uddin, M., Chowdhury, A., Anderson, K., & Chaudhuri, K. (2021). The effect of COVID–19 pandemic on global stock market volatility: Can economic strength help to manage the uncertainty?. Journal of Business Research, 128, 31-44.

Xu, Q., Chen, L., Jiang, C., & Yuan, J. (2018). Measuring systemic risk of the banking industry in China: A DCC-MIDAS-t approach. Pacific-Basin Finance Journal, 51, 13-31.

Yan, C. (2018). Hot money in disaggregated capital flows. The European Journal of Finance, 24(14), 1190-1223.

Zhang, W., Zhuang, X., Wang, J., & Lu, Y. (2020). Connectedness and systemic risk spillovers analysis of Chinese sectors based on tail risk network. The North American Journal of Economics and Finance, 54, 101248.

Zhao, S., Chen, X., & Zhang, J. (2019). The systemic risk of China’s stock market during the crashes in 2008 and 2015. Physica A: Statistical Mechanics and its Applications, 520, 161-177.

1https://www.niftyindices.com/reports/historical-data

2https://link.springer.com/content/pdf/bbm:978-1-137-44217-8/1.pdf