Network pricing: a sector based strategy

Abstract

The proposed analysis focuses on the investigation of network volatility relationships among different industrial sectors in the American market. Using a methodological ap- proach based on Bayesian VAR models, volatility networks, and portfolio analysis, the study examines the transmission dynamics of shocks and the possibility of extracting a risk factor dependent on the volatility contagion dynamics between sectors. Additionally, analyzing alpha generation versus CAPM provides insights into the ability of portfolios to generate abnormal returns.