Systemic Risk and the Macroeconomy: An Empirical Evaluation

Stefano Giglio, Bryan T. Kelly and Seth Pruitt ()

No 20963, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article evaluates a large collection of systemic risk measures based on their ability to predict macroeconomic downturns. We evaluate 19 measures of systemic risk in the US and Europe spanning several decades. We propose dimension reduction estimators for constructing systemic risk indexes from the cross section of measures and prove their consistency in a factor model setting. Empirically, systemic risk indexes provide significant predictive information out- of-sample for the lower tail of future macroeconomic shocks.

JEL-codes: C31 C32 C38 C58 E44 G01 G2 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-ban, nep-mac and nep-rmg
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Citations: View citations in EconPapers (23)

Published as Giglio, Stefano & Kelly, Bryan & Pruitt, Seth, 2016. "Systemic risk and the macroeconomy: An empirical evaluation," Journal of Financial Economics, Elsevier, vol. 119(3), pages 457-471.

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Journal Article: Systemic risk and the macroeconomy: An empirical evaluation (2016)
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