Better to stay apart: asset commonality, bipartite network centrality, and investment strategies

By exploiting a bipartite network representation of the relationships between mutual funds and portfolio holdings, we propose an indicator that we derive from the analysis of the network, labelled the Average Commonality Coefficient (ACC), which measures how frequently the assets in the fund portfolio are present in the portfolios of the other funds of the market. This indicator reflects the investment behavior of funds' managers as a function of the popularity of the assets they held. We show that $ACC$ provides useful information to discriminate between funds investing in niche markets and those investing in more popular assets. More importantly, we find that $ACC$ is able to provide indication on the performance of the funds. In particular, we find that funds investing in less popular assets generally outperform those investing in more popular financial instruments, even when correcting for standard factors. Moreover, funds with a low $ACC$ have been less affected by the 2007-08 global financial crisis, likely because less exposed to fire sales spillovers.Comment: 38 pages, 6 figure

Auctions vs. Bargaining: An Empirical Analysis of Medical Device Procurement

We test recent theory on the benefits of auctions and bargaining as alternative procurement mechanisms using data on the procurement of medical devices by Italian hospitals. Theory suggests that auctions perform well when cost control is the key concern, but are less effective at producing the optimal mix of quality and price for complex products where quality is difficult to verify. Consistent with the theory, we find that auctions are used more often when the influence of financial staff relative to medical staff is high, when the marginal cost of increasing product quality is high, and when the marginal value of increasing quality is low.-

The Accounting Network: how financial institutions react to systemic crisis

The role of Network Theory in the study of the financial crisis has been widely spotted in the latest years. It has been shown how the network topology and the dynamics running on top of it can trigger the outbreak of large systemic crisis. Following this methodological perspective we introduce here the Accounting Network, i.e. the network we can extract through vector similarities techniques from companies' financial statements. We build the Accounting Network on a large database of worldwide banks in the period 2001-2013, covering the onset of the global financial crisis of mid-2007. After a careful data cleaning, we apply a quality check in the construction of the network, introducing a parameter (the Quality Ratio) capable of trading off the size of the sample (coverage) and the representativeness of the financial statements (accuracy). We compute several basic network statistics and check, with the Louvain community detection algorithm, for emerging communities of banks. Remarkably enough sensible regional aggregations show up with the Japanese and the US clusters dominating the community structure, although the presence of a geographically mixed community points to a gradual convergence of banks into similar supranational practices. Finally, a Principal Component Analysis procedure reveals the main economic components that influence communities' heterogeneity. Even using the most basic vector similarity hypotheses on the composition of the financial statements, the signature of the financial crisis clearly arises across the years around 2008. We finally discuss how the Accounting Networks can be improved to reflect the best practices in the financial statement analysis

The evolution of networks of innovators within and across borders: Evidence from patent data

Recent studies on the geography of knowledge networks have documented a negative impact of physical distance and institutional borders upon research and development (R&D) collaborations. Though it is widely recognized that geographic constraints and national borders impede the diffusion of knowledge, less attention has been devoted to the temporal evolution of these constraints. In this study we use data on patents filed with the European Patent Office (EPO) for OECD countries to analyze the impact of physical distance and country borders on inter-regional links in four different networks over the period 1988-2009: (1) co-inventorship, (2) patent citations, (3) inventor mobility and (4) the location of R&D laboratories. We find the constraint imposed by country borders and distance decreased until mid-1990s then started to grow, particularly for distance. We further investigate the role of large innovation "hubs" as attractors of new collaboration opportunities and the impact of region size and locality on the evolution of cross-border patenting activities. The intensity of European cross-country inventor collaborations increased at a higher pace than their non-European counterparts until 2004, with no significant relative progress thereafter. Moreover, when analyzing networks of geographical mobility, multinational R&D activities and patent citations we cannot detect any substantial progress in European research integration above and beyond the common global trend

Networks of innovators within and across borders. Evidence from patent data

Recent studies on the geography of knowledge networks have documented a negative impact of physical distance and institutional borders upon research and development (R&D) collaborations. Though it is widely recognized that geographic constraints hamper the diffusion of knowledge, less attention has been devoted to the temporal evolution of these constraints. In this study we use data on patents filed with the European Patent Office (EPO) for 50 countries to analyze the impact of physical distance and country borders on inter-regional links in four different networks over the period 1988-2009: (1) co-inventorship, (2) patent citations, (3) inventor mobility and (4) the location of R&D laboratories. We find the constraint imposed by country borders and distance decreased until mid-1990s then started to grow, particularly for distance. The intensity of European cross-country inventor collaborations increased at a higher pace than their non-European counterparts until 2004, with no significant relative progress afterwards. Moreover, when analyzing networks of geographical mobility, multinational R&D activities and patent citations we do not depict any substantial progress in European research integration aside from the influence of common global trends

Systemic importance of financial institutions: from a global to a local perspective? A network theory approach

After the systemic effects of bank defaults during the recent financial crisis, and despite a huge amount of literature over the last years to detect systemic risk, no standard methodologies have been set up until now. We aim to build a concise but comprehensive picture of the state of the art, illustrating the open issues, and outlining pathways for future research. In particular, we propose the analysis of some examples of local systems that attract the attention of the financial sector. This work is directed to both academic researchers and practitioners

Systemic risk and banking regulation: some facts on the new regulatory framework

The recent financial crisis highlighted the relevant role of the systemic effects of banks’ defaults on the stability of the whole financial system. In this work we draw an organic picture of the current regulations, moving from the definitions of systemic risk to the issues concerning data availability. We show how a more detailed flow of data on traded deals might shed light on some systemic risk features taken into account only partially in the past. In particular, we analyse how the new regulatory framework allows regulators to describe OTC derivatives markets according to more detailed partitions, thus depicting a more realistic picture of the system. Finally, we suggest to study sub-markets illiquidity conditions to consider possible spill over effects which might lead to a worsening for the entire system

Assessing financial distress dependencies in OTC markets: a new approach by Trade Repositories data

After the recent financial crisis, it is undoubtedly recognized the importance of assessing not only the risk of distress for a single \financial entity", but also the distress dependencies between the different \entities", where by \entities" we mean in a broad sense any relevant cluster of products, risk factors, counterparties. In this paper, we focus on the Interest Rate Swap (IRS) segment as a significant fraction of the OTC market. We define a distress indicator by combining some distress drivers, such as averaged volumes, liquidity, volatility and bid-ask proxies. Hence, we analyse the distress dependencies among sub-markets identified by the segmentation of the IRS market according to contractual and financial features. We try to combine in an innovative way some new ingredients, namely the more granular data on OTC derivatives available from the trade repositories along with the classical JPoD approach introduced in the recent years by the IMF for studying the distress interdependence structure among financial institutions. The proposed technique seems to be quite promising. Indeed, the results are quite close to the practical intuition. At the best of our knowledge, this work is the first empirical study based on trade repositories' data for assessing systemic risk