International tail risk and world fear

Hollstein, F., Nguyen, D. B. B., Prokopczuk, M. and Wese Simen, C. (2019) International tail risk and world fear. Journal of International Money and Finance, 93. pp. 244-259. ISSN 0261-5606 doi: 10.1016/j.jimonfin.2019.01.004

Abstract/Summary

We examine the pricing of tail risk in international stock markets. Studying all MSCI Developed and Emerging Markets countries, we find that the tail risk of these countries is highly integrated. We find that both local and our newly computed global tail risk strongly predict global equity index excess returns. These results hold both in-sample and out-of-sample. Sorting countries into portfolios by their tail risk generates sizable excess returns across various holding periods. Finally, we find that global tail risk is linked to international economic activity.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/81649
Identification Number/DOI	10.1016/j.jimonfin.2019.01.004
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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