Work

Online Monitoring of Financial Market Information-Flow Networks Under External Shocks: A Rolling Directed-ERGM and Control-Chart Framework

Year: 2026

Type: article

Abstract: Amid frequent external shocks and deepening market linkages, the information-transmission structure of financial markets is more prone to phase-specific abrupt changes, creating a need for real-time monitoring methods. This study develops an online framework to track financial information-flow networks and to provide early warnings of structural changes under exogenous shocks. Methodologically, information-flow networks are constructed from return spillovers using the Diebold–Yilmaz framework. An Exponential Random Graph Model is then employed to quantify how exogenous variables affect edge formation. Statistical process control methods, namely the Multivariate Cumulative Sum (MCUSUM) and Multivariate Exponentially Weighted Moving Average (MEWMA), are introduced to online monitoring of exogenous-effect coefficients. The simulation study uses simulated data to assess whether the two charts are properly calibrated and sensitive to alarms. The empirical study uses Shanghai Stock Exchange (SSE) 180 constituent stocks and exogenous variables—7-day Fixing Repo Rate (FR007), M2 growth rate (M2), the China Economic Policy Uncertainty Index (CEPU), and the Global Economic Policy Uncertainty Index (GEPU) over 2011–2025. The results indicate that both charts achieve the target in-control average run length, and detection accelerates with shock magnitude; FR007 is generally negative, M2 is positive, and uncertainty measures vary strongly over time; monitoring reveals shock clustering and long-term drift, implying both shock amplification and structural drift in the information-flow network. Practically, the framework provides an implementable warning tool for tracking shock amplification, supporting timely risk management.

Source: Mathematics

DOI: 10.3390/math14060961

Authors: Zhongxiu Chen, Huina Tian, Zhenghui Li

Institution: Guangzhou University

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $3,137

Funder: Natural Science Foundation of Guangdong Province