The Financial Econometrics Seminar: 
Time: 10:30 pm
Date: 20th of October 2022
Room 3001 + Zoom

Thomas GIROUX (CREST & MIROVA) “TAIL RISK SYSTEMIC FACTORS”

Abstract :We develop a two-step econometric procedure, based on hidden factor estimation, to identify common factors driving the tail risk of asset returns. Applied to more than 1500 US stocks, using quarterly returns ranging from 2000 to 2020, we find that the equicorrelation and the market volatility are two signifiant drivers of assets’ tail risks, explaining up to 50% of the total variance. Drawing on a parsimonious model supporting the estimations, we show that investors accept a thinner tail when the market correlation increases and require a heavier tail when market volatility increases.

Organizers:

Jean-Michel ZAKOIAN  (CREST)

Sponsors:
CREST