Modeling Risk Contagion in the Venture Capital Market: A Multilayer Network Approach

Joint Authors

Zhang, X.
Valdez, L. D.
Stanley, H. E.
Braunstein, L. A.

Source

Complexity

Issue

Vol. 2019, Issue 2019 (31 Dec. 2019), pp.1-11, 11 p.

Publisher

Hindawi Publishing Corporation

Publication Date

2019-12-15

Country of Publication

Egypt

No. of Pages

11

Main Subjects

Philosophy

Abstract EN

Venture capital plays a critical role in spurring innovation, encouraging entrepreneurship, and generating wealth.

As a part of the financial market, venture capital is affected by market downturns and economic cycles, but it also creates bubbles that negatively impact the economy and social stability.

Although the venture capital market is a potential source of systemic risk, there has been little study of its contagion risk mechanism, or how the failure of a single market participant can threaten systemic stability.

We use a multilayer network analysis to model the risk contagion in a venture capital market when an external shock impacts a venture capital firm or start-up company in order to understand how risk can spread through connections between market participants and harm total market robustness.

We use our model to describe both the direct and indirect channels in the venture capital market that propagates risk and loss.

Using real data from the worldwide venture capital market, we find that the venture capital market exhibits the same “robust-yet-fragile” feature as other financial systems.

The coupling effect of direct and indirect risk contagions can cause abrupt transitions and large-scale damage even when the turbulence is minor.

We also find that the network structure, connectivity, and cash position distribution of market participants impact market robustness.

Our study complements other emerging research on measuring systemic risk through multiple connections among market players and on the feedback risk contagion between the financial industry and the real economy.

American Psychological Association (APA)

Zhang, X.& Valdez, L. D.& Stanley, H. E.& Braunstein, L. A.. 2019. Modeling Risk Contagion in the Venture Capital Market: A Multilayer Network Approach. Complexity،Vol. 2019, no. 2019, pp.1-11.
https://search.emarefa.net/detail/BIM-1133165

Modern Language Association (MLA)

Zhang, X.…[et al.]. Modeling Risk Contagion in the Venture Capital Market: A Multilayer Network Approach. Complexity No. 2019 (2019), pp.1-11.
https://search.emarefa.net/detail/BIM-1133165

American Medical Association (AMA)

Zhang, X.& Valdez, L. D.& Stanley, H. E.& Braunstein, L. A.. Modeling Risk Contagion in the Venture Capital Market: A Multilayer Network Approach. Complexity. 2019. Vol. 2019, no. 2019, pp.1-11.
https://search.emarefa.net/detail/BIM-1133165

Data Type

Journal Articles

Language

English

Notes

Includes bibliographical references

Record ID

BIM-1133165