Extreme Dependencies in the European Banking Sector

63 Pages Posted: 9 Oct 2019

See all articles by Konstantinos Gkillas

Konstantinos Gkillas

University of Patras - Business Administration

Christoforos Konstantatos

University of Patras - Business Administration

François Longin

ESSEC Business School

Athanasios Tsagkanos

University of Patras - Business Administration

Date Written: September 28, 2017

Abstract

We investigate the impact of 2008 global financial crisis due to Lehman Brothers collapse on tail dependence structure of the largest systemic banks in euro in a pairwise comparison using bivariate extreme value theory. The dataset includes banks equity prices from area core (Austria, Belgium, France and Germany) and periphery (Greece, Ireland, Italy, Portugal and Spain). We use the multivariate extreme value theory to model the tail dependence structure and we focus on extreme correlation to quantify the downside and upside dependencies. During the European sovereign debt crisis period, our findings reveal that the extreme correlation substantially increases among the banks of the core during the crisis. However, in same period, among the systemic banks in the we observe both increases and decreases to the level of extreme correlation. We also show that during the crisis the probability that shocks transmitted among the systemic banks in the core; and between the systemic banks in core and periphery is significantly higher.

Keywords: extreme correlation, euro area systemic banks, European sovereign debt crisis, core-periphery

JEL Classification: C46, C58, G15, F31

Suggested Citation

Gkillas, Konstantinos and Konstantatos, Christoforos and Longin, François and Tsagkanos, Athanasios, Extreme Dependencies in the European Banking Sector (September 28, 2017). Available at SSRN: https://ssrn.com/abstract=3460908 or http://dx.doi.org/10.2139/ssrn.3460908

Konstantinos Gkillas (Contact Author)

University of Patras - Business Administration ( email )

Patras
Greece

HOME PAGE: http://www.gillas.gr

Christoforos Konstantatos

University of Patras - Business Administration ( email )

Patras
Greece

François Longin

ESSEC Business School ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

HOME PAGE: http://www.essec.edu/faculty/francois-longin

Athanasios Tsagkanos

University of Patras - Business Administration ( email )

Patras
Greece

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