Extreme US Stock Market Fluctuations in the Wake of 9/11

By Stefan Straetmans, W. F. Verschoor, Christian C. P. Wolff. 2003

137 citations recorded by the source corpus.

We apply extreme value analysis to US sectoral stock indices in order to assess whether tail risk measures like value-at-risk and extremal linkages were significantly altered by 9|11. We test whether semi-parametric quantile estimates of 'downside risk' and 'upward potential' have increased after 9|11. The same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio. The latter probabilities measure the sectoral response to macro shocks during periods of financial stress (so-called 'tail-βs'). Taking 9|11 as the sample midpoint we find that tail-βs often increase in a statistically and economically significant way. This might be due to perceived risk of new terrorist attacks. Copyright © 2008 John Wiley & Sons, Ltd.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/98a8bf02d0364d1fac8b17be4068765b05d49ccd

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Citations in the corpus

Effectiveness of copula-extreme value theory in estimating value-at-risk: empirical evidence from Asian emerging markets (2012, background): “Bali (2007) and Straetmans, Verschoor, and Wolff (2008) find that the EVT models perform better estimations in an extreme volatile market than the standard approach that assumes the normal distribution.”
Back to the Basics in Banking? A Micro-Analysis of Banking System Stability (2009, methodology): “This approach has recently been used in the nance literature by Hartmann et al. (2006), Poon, Rockinger and Tawn (2004) and Straetmans et al. (2008).”
Destruction and Distress: Using a Quasi-Experiment to Show the Effects of the September 11 Attacks on Mental Well-Being in the United Kingdom (2011, background): “For example, there is now evidence to suggest that the attacks had a detrimental effect on the financial market (Chen and Siems, 2004; Straetmans et al., 2008) and New York s fiscal position (Dolfman and Wasser, 2004; Chernick and Haughwout, 2006).”