Financial crisis and extreme market risks: Evidence from Europe

Lucjan Orlowski

Review of Financial Economics, 2012, vol. 21, issue 3, 120-130

Abstract: This study draws attention to the proliferation of extreme risks in financial markets prior to and during the course of the recent global financial crisis. It examines the level of such “tail” risks in selected equity, interbank lending and foreign exchange markets in selected EU Member States in relation to the United States. The extent of tail risks is assessed by applying general error distribution (GED) parameterization in GARCH volatility tests of the examined variables. The empirical tests prove that extreme market risks were pronounced across all of the examined European financial markets throughout the crisis. They were also significant prior to the crisis outbreak. The analyzed interbank lending markets exhibited more extreme volatility outbursts than the equity and foreign exchange markets did.

Keywords: Tail risk; Systemic risk; Financial crisis; EU Member States (search for similar items in EconPapers)
JEL-codes: E44 G15 G32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:21:y:2012:i:3:p:120-130

DOI: 10.1016/j.rfe.2012.06.006

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