Disentangling Crashes from Tail Events

17 Pages Posted: 17 Oct 2010 Last revised: 21 Jun 2015

See all articles by Sofiane Aboura

Sofiane Aboura

Université Paris XIII Nord - Department of Economics and Management

Date Written: May 31, 2011

Abstract

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.

Keywords: Crash, Volatility, Risk Management, Contagion Effect, Systemic Risk

JEL Classification: C4, G01, G28, G32

Suggested Citation

Aboura, Sofiane, Disentangling Crashes from Tail Events (May 31, 2011). Available at SSRN: https://ssrn.com/abstract=1692799 or http://dx.doi.org/10.2139/ssrn.1692799

Sofiane Aboura (Contact Author)

Université Paris XIII Nord - Department of Economics and Management ( email )

99 avenue Jean-Baptiste
Clément, Villetaneuse 93430
France

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