CISS of death: measuring financial crises in real time

Sulkhan Chavleishvili and Manfred Kremer

Review of Finance, 2025, vol. 29, issue 3, 685-710

Abstract: This article presents a general conceptual and statistical framework for measuring the severity of financial crises on a continuous scale and in real time. It results in a composite index that operationalizes the concept of systemic financial stress. The framework nests many existing financial stress and systemic risk indicators as special cases. The Composite Indicator of Systemic Stress (CISS) is introduced as an index design that provides crisis signals which are timely, robust, and free of look-ahead bias. The CISS aggregates a representative set of market-specific stress indicators using their time-varying cross-correlations as systemic risk weights. Confirming its nature as a crisis severity measure, empirical analysis shows that the CISS has strong short-term predictive and nowcasting power for economic activity, and that these effects are stronger in bad states of the economy.

Keywords: financial crisis; financial stress index; growth-at-risk; macro-financial linkages; nowcasting; systemic risk (search for similar items in EconPapers)
JEL-codes: C14 C31 C43 C53 E44 G01 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:29:y:2025:i:3:p:685-710.

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