Systematic Extreme Downside Risk
Date
2019-02-25
Advisors
Journal Title
Journal ISSN
ISSN
Volume Title
Publisher
Elsevier
Type
Article
Peer reviewed
Yes
Abstract
We propose new systematic tail risk measures constructed using two different approaches. The first is a nonparametric 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.
Description
The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.
Keywords
Asset pricing, Tail risk, Co-moment, Value-at-Risk, Systematic risk
Citation
Harris, R. D. F., Nguyen, L. H., Stoja, E. (2019) Systematic extreme downside risk. Journal of International Financial Markets, Institutions and Money, 61, pp. 128-142