Systematic tail risk

Richard Harris (), Evarist Stoja () and Linh Nguyen ()
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Richard Harris: University of Exeter
Evarist Stoja: University of Bristol
Linh Nguyen: University of Exeter

No 637, Bank of England working papers from Bank of England

Abstract: We propose new systematic tail risk measures constructed using two different approaches. The first extends the canonical downside beta and co-moment measures, 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, co-skewness and co-kurtosis. Using these measures, we examine the relevance of the tail risk premium for investors with different investment horizons.

Keywords: Asset pricing; downside risk; tail risk; co-moments; value at risk; systematic risk (search for similar items in EconPapers)
JEL-codes: C13 C31 C58 G01 G10 G12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2016-12-16
New Economics Papers: this item is included in nep-fmk, nep-ore and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0637

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