Back to the future: Backtesting systemic risk measures during historical bank runs and the great depression

Christian Brownlees, Ben Chabot, Eric Ghysels and Christopher Kurz

Journal of Banking & Finance, 2020, vol. 113, issue C

Abstract: We evaluate the performance of two popular systemic risk measures, CoVaR and SRISK, during eight financial panics in the era before FDIC insurance. Bank stock price and balance sheet data were not readily available for this period. We rectify this shortcoming by constructing a novel dataset for the New York banking system before 1933. Our evaluation exercise focuses on two challenges: ranking systemically important financial institutions (SIFIs) and financial crisis prediction. We find that CoVaR and SRISK meet the SIFI ranking challenge. That is, they help identify systemic institutions in periods of distress beyond what is explained by standard risk measures up to six months before panics. In contrast, aggregate CoVaR and SRISK are only somewhat effective at predicting financial crises.

Keywords: Systemic Risk; Financial Crises; Risk Measures (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 N21 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Back to the Future: Backtesting Systemic Risk Measures during Historical Bank Runs and the Great Depression (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426620300030

DOI: 10.1016/j.jbankfin.2020.105736

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