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Measuring and testing for the systemically important financial institutions

Carlos Castro Iragorri () and Stijn Ferrari

Journal of Empirical Finance, 2014, vol. 25, issue C, 1-14

Abstract: This paper analyzes ΔCoVaR proposed by Adrian and Brunnermeier (2011) as a tool for identifying/ranking systemically important institutions. We develop a test of significance of ΔCoVaR that allows determining whether or not a financial institution can be classified as being systemically important on the basis of the estimated systemic risk contribution, as well as a test of dominance aimed at testing whether or not, according to ΔCoVaR, one financial institution is more systemically important than another. We provide an empirical application on a sample of 26 large European banks to show the importance of statistical testing when using ΔCoVaR, and more generally also other market-based systemic risk measures, in this context.

Keywords: Systemic risk; SIFIs; Quantile regression; Stochastic dominance test (search for similar items in EconPapers)
JEL-codes: C21 C58 G32 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Measuring and testing for the systemically important financial institutions (2012) Downloads
Working Paper: Measuring and testing for the systemically important financial institutions (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:25:y:2014:i:c:p:1-14

DOI: 10.1016/j.jempfin.2013.10.009

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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