Systematic extreme downside risk

Research output: Contribution to journalArticle (Academic Journal)peer-review

22 Citations (Scopus)
119 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 languageEnglish
Pages (from-to)128-142
Number of pages15
JournalJournal of International Financial Markets, Institutions and Money
Volume61
Early online date25 Feb 2019
DOIs
Publication statusPublished - 1 Jul 2019

Research Groups and Themes

  • AF Financial Markets

Keywords

  • Asset pricing
  • Comoments
  • Systematic risk
  • Tail risk
  • Value at Risk

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