Nonparametric tail risk, stock returns, and the macroeconomy
Almeida, Caio Ibsen Rodrigues de; Ardison, Kym Marcel Martins; Garcia, René; Vicente, José
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Resumo
This paper introduces a new tail-risk measure based on the risk-neutral excess expected shortfall of a cross-section of stock returns. We propose a novel way to risk neutralize the returns without relying on option price information. Empirically, we illustrate our methodology by estimating a tail-risk measure over a long historical period based on a set of size and book-to-market portfolios. We find that a risk premium is associated with long-short strategies with portfolio sorts based on tail-risk sensitivities of individual securities. Our tail-risk index also provides meaningful information about future market returns and aggregate macroeconomic conditions. Results are robust to the cross-sectional information and other parameters selected to compute the tail-risk measure.
Ficha do documento
- Tipo
- Artigo científico
- Ano
- 2016
- Instituição
- Cirano
- Fonte
- Repositório da FGV
- Idioma
- Inglês
- Acesso
- Acesso restrito
- Identificador
- oai:repositorio.fgv.br:10438/23771
- Temas
- Economia
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