Marco Valerio Geraci and Jean-Yves Gnabo
We propose a market-based framework that exploits time-varying parameter vector autoregressions to estimate the dynamic network of nancial spillover effects. We apply it to nancials in the Standard & Poor’s 500 index and estimate interconnectedness at the sector and institution level. At the sector level, we uncover two main events in terms of interconnectedness: the Long Term Capital Management crisis and the 2008 crisis. After these crisis events, we nd a gradual decrease in interconnectedness, not observable using the classical rolling window approach. At the institution level, our framework delivers more stable interconnectedness rankings over time than other market-based measures.