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Econometric Measures of Systemic Risk in the Finance and Insurance Sectors / Monica Billio, Mila Getmansky, Andrew W. Lo, Loriana Pelizzon.
- Format:
- Book
- Author/Creator:
- Billio, Monica.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16223.
- NBER working paper series no. w16223
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- We propose several econometric measures of systemic risk to capture the interconnectedness among the monthly returns of hedge funds, banks, brokers, and insurance companies based on principal components analysis and Granger-causality tests. We find that all four sectors have become highly interrelated over the past decade, increasing the level of systemic risk in the finance and insurance industries. These measures can also identify and quantify financial crisis periods, and seem to contain predictive power for the current financial crisis. Our results suggest that hedge funds can provide early indications of market dislocation, and systemic risk arises from a complex and dynamic network of relationships among hedge funds, banks, insurance companies, and brokers.
- Notes:
- Print version record
- July 2010.
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