Jump Risk in the US Financial Sector

• Gajurel, Dinesh ^[1] ; Dungey, Mardi ^[2] ; Yao, Wenying ^[3] ; Jeyasreedharan, Nagaratnam ^[2]
  1. [1] University of New Brunswick

     University of New Brunswick

     Canadá

     
  2. [2] University of Tasmania

     University of Tasmania

     Australia

     
  3. [3] Deakin University

     Deakin University

     Australia

     

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• Localización: Economic record, ISSN 0013-0249, Vol. 96, Nº. 314, 2020, págs. 331-349
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • In this paper we establish empirical evidence for the relationship between the systematic jump betas of financial institutions and two types of systemic risk index: a capital shortfall index and a interconnectedness index. Using high-frequency data for US financial sector stocks, we show that equity market jumps are positively related to capital shortfall and negatively related to interconnectedness. Higher potential capital shortfall measures of systemic risk lead to a greater sensitivity to systematic jumps, while increased interconnectedness leads to greater resistance. Our findings, along with indicators such as size and leverage, provide a means to identify the possible trade-offs that regulators might face when assessing the systemic risks of financial institutions, particularly in the context of the cross-multiple influences within the sector.