Background and Motivation
As China accelerates its transition toward a low-carbon economy, the new energy sector has become a strategic pillar, drawing increasing attention and capital from the financial system. With this capital influx comes heightened concern about systemic risk spillovers between financial institutions and new energy firms, particularly during periods of market stress. Traditional single-layer models fail to capture the complex, multi-dimensional risk interactions across sectors.
China Finance Review International (CFRI) presents the article titled " Multilayer Network Analysis for the Interconnectedness Between Financial Sectors and New Energy Companies in China ", which investigates these relationships through a multilayer network framework using high-frequency data.
Methodology and Scope
The authors construct a multilayer connectedness network based on three realised indicators—realised volatility (RV), realised skewness (RS), and realised kurtosis (RK)—all derived from 5-minute intraday trading data covering 2012–2022. They apply the Diebold-Yilmaz (DY) connectedness framework, enhanced with a LASSO-VAR model, to 25 companies: 13 listed banks, 3 insurance firms, and 9 leading new energy firms ranked by market capitalisation.
System- and company-level indicators are computed to evaluate not only overall connectedness but also the direction and strength of risk spillovers within and across layers.
Key Findings and Contributions
Why It Matters
The study offers a more granular and dynamic understanding of how systemic risk propagates between critical sectors in China. By integrating multiple layers of risk measurement, it provides a more robust framework for monitoring financial stability in an era of green transformation and increasing financialization of the energy market.
Practical Applications
Discover high-quality academic insights in finance from this article published in China Finance Review International . Click the DOI below to read the full-text original! Open access for a limited time!
China Finance Review International
News article
Multilayer network analysis for the interconnectedness between financial sectors and new energy companies in China
5-Jun-2025