47 Pages Posted: 21 Dec 2011 Last revised: 21 Jan 2014
Date Written: June 18, 2013
We derive several popular systemic risk measures in a common framework and show that they can be expressed as transformations of market risk measures (e.g., beta). We also derive conditions under which the different measures lead to similar rankings of systemically important financial institutions (SIFIs). In an empirical analysis of US financial institutions, we show that (1) different systemic risk measures identify different SIFIs and that (2) firm rankings based on systemic risk estimates mirror rankings obtained by sorting firms on market risk or liabilities. One-factor linear models explain most of the variability of the systemic risk estimates, which indicates that systemic risk measures fall short in capturing the multiple facets of systemic risk.
Keywords: Banking Regulation, Systemically Important Financial Firms, Marginal Expected Shortfall, SRISK, CoVaR, Systemic vs. Systematic Risk
JEL Classification: G01, G32
Suggested Citation: Suggested Citation
Benoit, Sylvain and Colletaz, Gilbert and Hurlin, Christophe and Perignon, Christophe, A Theoretical and Empirical Comparison of Systemic Risk Measures (June 18, 2013). HEC Paris Research Paper No. FIN-2014-1030. Available at SSRN: https://ssrn.com/abstract=1973950 or http://dx.doi.org/10.2139/ssrn.1973950