Disentangling Crashes from Tail Events
Université Paris-Dauphine - Centre de Recherches sur la Gestion (CEREG)
May 31, 2011
The study of tail events has become a central preoccupation for academics, investors and policy makers, given the recent financial turmoil. However, the question on what differentiates a crash from a tail event remains unsolved.
This article elaborates a new definition of stock market crash taking a risk management perspective based on an augmented extreme value theory methodology. An empirical test on the French stock market (1968-2008) indicates that it experienced only two crashes in 2007-2008 among the 12 identified over the whole period.
Number of Pages in PDF File: 17
Keywords: Crash, Volatility, Risk Management, Contagion Effect, Systemic Risk
JEL Classification: C4, G01, G28, G32working papers series
Date posted: October 17, 2010 ; Last revised: May 17, 2012
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