Researcher from Bucharest University of Economic Studies Describes Findings in Risk Management (Quantitative Modeling of Financial Contagion: Unraveling Market Dynamics and Bubble Detection Mechanisms): Insurance – Risk Management

2024 FEB 28 (NewsRx) -- By a News Reporter-Staff News Editor at NewsRx COVID-19 Daily -- A new study on risk management is now available. According to news reporting from Bucharest, Romania, by NewsRx journalists, research stated, “This study explored the complex interplay and potential risk of financial contagion across major financial indices, focusing on the Bucharest Exchange Trading Investment Funds Index (BET-FI), along with global indices like the S&P 500, Nasdaq Composite (IXIC), and Dow Jones Industrial Average (DJIA). Our analysis covered an extensive period from 2012 to 2023, with a particular emphasis on Romania’s financial market.”

Our news editors obtained a quote from the research from Bucharest University of Economic Studies: “We employed Autoregressive Distributed Lag (ARDL) modeling to examine the interrelations among these indices, treating the BET-FI index as our primary variable. Our research also integrated Exponential Curve Fitting (EXCF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) models to identify and scrutinize potential price bubbles in these indices. We analyzed moments of high volatility and deviations from typical market trends, influenced by diverse factors like government policies, presidential elections, tech sector performance, the COVID-19 pandemic, and geopolitical tensions, specifically the Russia-Ukraine conflict. The ARDL model revealed a stable long-term relationship among the variables, indicating their interconnectedness. Our study also highlights the significance of short-term market shifts leading to long-term equilibrium, as shown in the Error Correction Model (ECM). This suggests the existence of contagion effects, where small, short-term incidents can trigger long-term, domino-like impacts on the financial markets. Furthermore, our variance decomposition examined the evolving contributions of different factors over time, shedding light on their changing interactions and impact.”

According to the news editors, the research concluded: “The Cholesky factors demonstrated the interdependence between indices, essential for understanding financial contagion effects. Our research thus uncovered the nuanced dynamics of financial contagion, offering insights into market variations, the effectiveness of our models, and strategies for detecting financial bubbles. This study contributes valuable knowledge to the academic field and offers practical insights for investors in turbulent financial environments.”

For more information on this research see: Quantitative Modeling of Financial Contagion: Unraveling Market Dynamics and Bubble Detection Mechanisms. Risks, 2024,12(2). (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks12020036.

Our news journalists report that additional information may be obtained by contacting Ionut Nica, Department of Economic Informatics and Cybernetics, Bucharest University of Economic Studies, 0105552 Bucharest, Romania. Additional authors for this research include Stefan Ionescu, Camelia Delcea, Nora Chirita.

ORCID is an identifier for authors and includes bibliographic information. The following is ORCID information for the authors of this research: Ionut Nica (http://orcid.org/0000-0003-2118-3654), Stefan Ionescu (http://orcid.org/0000-0002-0469-3022), Camelia Delcea (http://orcid.org/0000-0003-3589-1969), Nora Chirita (http://orcid.org/0009-0005-6633-9466).

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