Abstract

http://ssrn.com/abstract=2158347
 


 



Systemic Risk and the Macroeconomy: An Empirical Evaluation


Stefano Giglio


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Bryan T. Kelly


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Seth Pruitt


Federal Reserve Board

October 1, 2013

Chicago Booth Research Paper No. 12-49
Fama-Miller Working Paper

Abstract:     
We propose an empirical criterion for evaluating systemic risk measures based on their ability to predict quantiles of future macroeconomic shocks. We construct 17 measures of systemic risk in the US and Europe spanning several decades. We propose dimension reduction estimators for constructing systemic risk indexes from the cross section of measures and prove their consistency in a factor model setting. Empirically, systemic risk indexes provide significant predictive information for the lower tail of future macroeconomic shocks, even out-of-sample.

Number of Pages in PDF File: 60

Keywords: systemic risk, measures, quantile regression, predictive regression, macroeconomic downturns

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Date posted: October 26, 2012 ; Last revised: November 15, 2013

Suggested Citation

Giglio, Stefano and Kelly, Bryan T. and Pruitt, Seth, Systemic Risk and the Macroeconomy: An Empirical Evaluation (October 1, 2013). Chicago Booth Research Paper No. 12-49; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2158347 or http://dx.doi.org/10.2139/ssrn.2158347

Contact Information

Stefano Giglio (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Bryan T. Kelly
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8359 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Seth Pruitt
Federal Reserve Board ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
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