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Risk Generating Industries for European Stock Markets

Lucian Albu, Radu Lupu and Adrian Cantemir Calin
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Radu Lupu: Institute for Economic Forecasting Romanian Academy

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2017, vol. 51, issue 4, 5-17

Abstract: The analysis of contagion received a substantioanl dose of academic attention. This paper aims to determine the potential contagion effects for a large set of financial assets. We employ 5-minute closing prices for the companies included in STOXX600 and build a methdological framework that allows the computation of simple differences between the Cornish-Fisher VaR and the standard normal distribution VaR dynamics. These differences account for the amount of risk that is generated by the non-normality of the distribution of log-returns, more precisely the part that is spurred by the skewness and kurtosis indicators. These measures are synthesized at industry level and submitted to a causality analysis. Our approach allows us to pinpoint possible inter-industry spillover effects and we find the industries that have the propensity to inject risk in the system via a Granger-causality test.

Keywords: contagion; systemic risk; Cornish-Fisher expansion; European Stock Markets. (search for similar items in EconPapers)
JEL-codes: G15 G31 (search for similar items in EconPapers)
Date: 2017
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