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Systemic Risk Across Sectors: Are Banks Different?Sander MunsCPB Netherlands Bureau of Economic Policy Analysis; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) Michiel J. BijlsmaCPB Netherlands Bureau of Economic Policy Analysis; Tilburg Law and Economics Center (TILEC) April 6, 2011 TILEC Discussion Paper No. 2011-027 Abstract: We compare systemic risk in the banking sector, the insurance sector, the construction sector, and the food sector. To measure systemic risk, we use extreme negative returns in stock return data for the twenty largest U.S. Firms in each sector. We find that systemic risk is significantly larger in the banking sector relative to the other three sectors. This result is robust to separating out correlations with an economy-wide stock market index. For very extreme negative returns, the dependencies in the banking sector are driven by common heteroskedasticity, whereas they are driven by idiosyncratic factors in the other sectors.
Number of Pages in PDF File: 43 Keywords: Systemic risk, financial markets, banking, extreme value theory JEL Classification: G01, G11, G21 working papers seriesDate posted: May 3, 2011Suggested CitationContact Information
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