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Disentangling Crashes from Tail Events
Author(s) -
Aboura Sofiane
Publication year - 2015
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1510
Subject(s) - stock market crash , crash , economics , stock market , financial economics , stock (firearms) , extreme value theory , event study , perspective (graphical) , econometrics , actuarial science , geography , statistics , context (archaeology) , archaeology , mathematics , artificial intelligence , computer science , programming language
The study of tail events has become a central preoccupation for academics, investors and policy makers, given the recent financial turmoil. However, the question on what differentiates a crash from a tail event remains unsolved. This article elaborates a new definition of stock market crash taking a risk management perspective based on an augmented extreme value theory methodology. An empirical test on the French stock market (1968–2008) indicates that it experienced only two crashes in 2007–2008 among the 12 identified over the whole period. Copyright © 2015 John Wiley & Sons, Ltd.