Risk management has generally focused on aggregate connectedness, overlooking its cyclical sources. We argue that the frequency dynamics is insightful for studying this connectedness because shocks with heterogeneous frequency responses create linkages with various degrees of persistence. Such connections are important for understanding the possible sources of systemic risk specific to economic cycles but remain hidden when aggregate measures of connectedness are used . To estimate connectedness on short-, medium-, and long-term financial cycles, we propose a general framework based on  spectral representation of variance decompositions. In an empirical application, we document the rich  dynamics of volatility connectedness in the US financial institutions with short-term connections due to contemporaneous correlations as well as significant weekly, monthly, and longer connections that play a role. Hence, we find that the financial market clears part of the information but that the permanent changes in investors' expectations having longer-term responses are non-negligible .
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks . To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a framework based on the spectral representation of variance decompositions. In an empirical application, we document the rich time-frequency dynamics of volatility connectedness in US financial institutions . Economically, periods in which connectedness is created at high frequencies are periods when stock markets seem to process information rapidly and calmly, and a shock to one asset in the system will have an impact mainly in the short term. When the connectedness is created at lower frequencies, it suggests that shocks are persistent and are being transmitted for longer periods .
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Risk management has generally focused on aggregate connectedness, overlooking its cyclical sources. We argue that the frequency dynamics is insightful for studying this connectedness because shocks with
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create linkages with various degrees of persistence. Such connections are important for understanding the possible sources of systemic risk specific to economic cycles but remain hidden when aggregate measures of connectedness are used
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with short-term connections due to contemporaneous correlations as well as significant weekly, monthly, and longer connections that play a role. Hence, we find that the financial market clears part of the information but that the permanent changes in investors' expectations having longer-term responses are non-negligible
. Economically, periods in which connectedness is created at high frequencies are periods when stock markets seem to process information rapidly and calmly, and a shock to one asset in the system will have an impact mainly in the short term. When the connectedness is created at lower frequencies, it suggests that shocks are persistent and are being transmitted for longer periods