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

Rights

Research Institute

Finance and Banking Research Group (FiBRe)