Global financial crisis and multiscale systematic risk: Evidence from selected European stock markets

Antonios K. Alexandridis and Mohammad S. Hasan

International Journal of Finance & Economics, 2020, vol. 25, issue 4, 518-546

Abstract: In this paper, we have investigated the impact of the global financial crisis on the multihorizon nature of systematic risk and market risk using daily data of eight major European equity markets over the period of 2005–2018. The method is based on a wavelet multiscale approach within the framework of a capital asset pricing model. Empirical results demonstrate that beta coefficients have a multiscale tendency, and betas tend to increase at higher scales (lower frequencies). In addition, the size of betas and R2s tends to increase during the crisis period compared with the precrisis period. The multiscale nature of the betas is consistent with the fact that stock market investors have different time horizons due to different trading strategies. Our results based on scale dependent value at risk (VaR) suggest that market risk tends to be more concentrated at lower time scales (higher frequencies) of the data. Moreover, the scale‐by‐scale estimates of VaR have increased almost three folds for every market during the crisis period compared with the precrisis period. Finally, our approach allows for accurately forecasting time‐dependent betas and VaR.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1002/ijfe.1764

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:25:y:2020:i:4:p:518-546

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().