Systematic extreme downside risk

Richard Harris, Linh H. Nguyen and Evarist Stoja

Journal of International Financial Markets, Institutions and Money, 2019, vol. 61, issue C, 128-142

Abstract: We propose new systematic tail risk measures constructed using two different approaches. The first is a non-parametric measure that captures the tendency of a stock to crash at the same time as the market, 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, coskewness and cokurtosis. Using the new measures, we examine the relevance for investors of the tail risk premium over different horizons.

Keywords: Asset pricing; Tail risk; Comoments; 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)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:61:y:2019:i:c:p:128-142

DOI: 10.1016/j.intfin.2019.02.007

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