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Research Details
Networks of common asset holdings: aggregation and measures of vulnerability, Journal of Network Theory in Finance
Abstract
This paper quantifies the interrelations induced among financial institutions by common asset holdings. A network representation emerges in which nodes represent portfolios and edge weights aggregate the common asset holdings as well as the liquidity of these holdings. As a building block, we introduce a simple model of order imbalance that estimates price impacts caused by liquidity shocks. In our model, asset prices are set by a competitive risk-neutral market maker, and the arrival rates for buyers and sellers depend on the common asset holdings. We illustrate the relevance of our aggregation method and the resulting network representation using data on mutual fund asset holdings. We compare three related measures of vulnerability in the network and demonstrate a strong dependence between mutual fund returns and these measures.
Type
Article
Author(s)
Anton Braverman, Andreea Minca
Date Published
2018
Citations
Braverman, Anton, and Andreea Minca. 2018. Networks of common asset holdings: aggregation and measures of vulnerability. Journal of Network Theory in Finance. 4(3): 53-78.
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