Systematic extreme downside risk

Richard Harris; Linh Nguyen; Evarist Stoja

doi:10.1016/j.intfin.2019.02.007

Systematic extreme downside risk

Richard Harris, Linh Nguyen, Evarist Stoja

School of Accounting and Finance

Research output: Contribution to journal › Article (Academic Journal) › peer-review

10 Citations (Scopus)

56 Downloads (Pure)

Abstract

We propose new systematic tail risk measures constructed using two different approaches. The first is a non-parametric measure that captures the tendency of a stock to crash at the same time as the market, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated with a significantly positive risk premium after controlling for other measures of downside risk, including downside beta, coskewness and cokurtosis. Using the new measures, we examine the relevance for investors of the tail risk premium over different horizons.

Original language	English
Pages (from-to)	128-142
Number of pages	15
Journal	Journal of International Financial Markets, Institutions and Money
Volume	61
Early online date	25 Feb 2019
DOIs	https://doi.org/10.1016/j.intfin.2019.02.007
Publication status	Published - 1 Jul 2019

Structured keywords

AF Financial Markets

Keywords

Asset pricing
Comoments
Systematic risk
Tail risk
Value at Risk

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10.1016/j.intfin.2019.02.007

Full-text PDF (accepted author manuscript)
This is the author accepted manuscript (AAM). The final published version (version of record) is available online via Elsevier at https://www.sciencedirect.com/science/article/pii/S1042443117305814?via%3Dihub. Please refer to any applicable terms of use of the publisher.
Accepted author manuscript, 477 KBLicence: CC BY-NC-ND

Cite this

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title = "Systematic extreme downside risk",

abstract = "We propose new systematic tail risk measures constructed using two different approaches. The first is a non-parametric measure that captures the tendency of a stock to crash at the same time as the market, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated with a significantly positive risk premium after controlling for other measures of downside risk, including downside beta, coskewness and cokurtosis. Using the new measures, we examine the relevance for investors of the tail risk premium over different horizons.",

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author = "Richard Harris and Linh Nguyen and Evarist Stoja",

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language = "English",

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T1 - Systematic extreme downside risk

AU - Harris, Richard

AU - Nguyen, Linh

AU - Stoja, Evarist

PY - 2019/7/1

Y1 - 2019/7/1

N2 - We propose new systematic tail risk measures constructed using two different approaches. The first is a non-parametric measure that captures the tendency of a stock to crash at the same time as the market, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated with a significantly positive risk premium after controlling for other measures of downside risk, including downside beta, coskewness and cokurtosis. Using the new measures, we examine the relevance for investors of the tail risk premium over different horizons.

AB - We propose new systematic tail risk measures constructed using two different approaches. The first is a non-parametric measure that captures the tendency of a stock to crash at the same time as the market, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated with a significantly positive risk premium after controlling for other measures of downside risk, including downside beta, coskewness and cokurtosis. Using the new measures, we examine the relevance for investors of the tail risk premium over different horizons.

KW - Asset pricing

KW - Comoments

KW - Systematic risk

KW - Tail risk

KW - Value at Risk

UR - http://www.scopus.com/inward/record.url?scp=85062393957&partnerID=8YFLogxK

U2 - 10.1016/j.intfin.2019.02.007

DO - 10.1016/j.intfin.2019.02.007

M3 - Article (Academic Journal)

AN - SCOPUS:85062393957

VL - 61

SP - 128

EP - 142

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

SN - 1042-4431

ER -

Systematic extreme downside risk

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Professor Richard D F Harris

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Systematic extreme downside risk

Abstract

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Professor Richard D F Harris

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