Measuring Systemic Risk: Common Factor Exposures and Tail Dependence Effects

Wan Chien Chiu, Juan Ignacio Peña, Chih Wei Wang

研究成果: 雜誌貢獻期刊論文同行評審

3 引文 斯高帕斯(Scopus)


We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of infrequent and extreme events. Using data on the four sectors of the US financial industry from 1996 to 2011, we uncover two key empirical findings. First, disregarding the effect of the tail dependence factor leads to a downward bias in the measurement of systemic risk, especially during weak economic times. Second, when these measures serve as leading indicators of the St. Louis Fed Financial Stress Index, measures that include a tail dependence factor offer better forecasting ability than measures based on a common factor only.

頁(從 - 到)833-866
期刊European Financial Management
出版狀態已出版 - 1 11月 2015


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