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dc.contributor.authorHarris, Richard D. F.
dc.contributor.authorNguyen, Linh H.
dc.contributor.authorStoja, Evarist
dc.date.accessioned2019-05-14T13:44:59Z
dc.date.available2019-05-14T13:44:59Z
dc.date.issued2019-06-10
dc.identifier.citationHarris, R.D., Nguyen, L.H. and Stoja, E., (2019) (Accepted/In press). Extreme downside risk and market turbulence. Quantitative Finance,en
dc.identifier.urihttps://www.dora.dmu.ac.uk/handle/2086/17820
dc.descriptionThe file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.en
dc.description.abstractWe investigate the dynamics of the relationship between returns and extreme downside risk in different states of the market by combining the framework of Bali, Demirtas, and Levy (2009) with a Markov switching mechanism. We show that the risk-return relationship identified by Bali, Demirtas, and Levy (2009) is highly significant in the low volatility state but disappears during periods of market turbulence. This is puzzling since it is during such periods that downside risk should be most prominent. We show that the absence of the risk-return relationship in the high volatility state is due to leverage and volatility feedback effects arising from increased persistence in volatility. To better filter out these effects, we propose a simple modification that yields a positive tail risk-return relationship in all states of market volatility.en
dc.language.isoenen
dc.publisherTaylor and Francisen
dc.subjectDownside risken
dc.subjectTail risken
dc.subjectMarkov switchingen
dc.subjectValue-at-Risken
dc.subjectLeverage effecten
dc.subjectVolatility feedback effecten
dc.titleExtreme downside risk and market turbulenceen
dc.typeArticleen
dc.identifier.doihttps://dx.doi.org/10.1080/14697688.2019.1614652
dc.peerreviewedYesen
dc.funderNo external funderen
dc.cclicenceCC BYen
dc.date.acceptance2019-04-29
dc.researchinstituteFinance and Banking Research Group (FiBRe)en


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