This paper investigates whether multivariate crash risk is priced in the cross- section of expected stock returns. Motivated by a theoretical asset pricing model, we capture the multivariate crash risk of a stock by a combined measure based on its expected shortfall and its multivariate lower...

Traditionally, insurers are seen as stabilisers of financial markets that act countercyclically by buying assets whose price falls. Recent studies challenge this view by providing empirical evidence of procyclicality. This paper sheds new light on the underlying reasons for these opposing views....

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

This paper proposes a risk-based explanation of the momentum anomaly on equity markets. Regressing the momentum strategy return on the return of a self-financing portfolio going long (short) in stocks with high (low) crash sensitivity in the USA from 1963 to 2012 reduces the momentum effect from...

We analyze the term structure of illiquidity premiums as the difference between the yield curves of two major bond segments that are both government guaranteed but differ in their liquidity. We show that its characteristics strongly depend on the economic situation. In crisis times, illiquidity...

According to the financial press, firms with low leverage have lower distress risk due to their reduced exposure to the credit market, especially during credit crises. Compared to their conventional and socially responsible (SRI) counterparts, sharia compliant (SC) stocks are low-leverage...

From 2004 to 2015, the market perception of the sovereign risks of the euro area government bonds experienced several different phases, reflected in a clear time structure of the correlation matrix between the yield changes. “Core” and “peripheral” bonds cluster in a bloc-like structure,...

This paper provides a first step in developing a system-wide stress simulation. The model incorporates several important features of the financial system. These include several types of institution (including banks and non-banks) and how their actions may propagate and amplify stress. Rather...

The principles of behavioral psychology can explain how crashes occur. In particular, the concept of "stimulus generalization" tells us that organisms tend to respond in the same way to similar stimuli. In a crash, or pre-crash, context, several stimuli - including rising prices, above-average...

This research analyzes and extend the study of contagion for BRICS Emerging Stock Markets in the context of the last two international financial crises: the Lehman Brothers Bankruptcy Crisis and the European Sovereign Debt Crisis. We investigate changes in the relationship and the co-movements...