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Financial crisis and extreme market risks: Evidence from Europe

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  • Orlowski, Lucjan T.

Abstract

This study draws attention to the proliferation of extreme risks in financial markets prior to and during the course of the recent global financial crisis. It examines the level of such “tail” risks in selected equity, interbank lending and foreign exchange markets in selected EU Member States in relation to the United States. The extent of tail risks is assessed by applying general error distribution (GED) parameterization in GARCH volatility tests of the examined variables. The empirical tests prove that extreme market risks were pronounced across all of the examined European financial markets throughout the crisis. They were also significant prior to the crisis outbreak. The analyzed interbank lending markets exhibited more extreme volatility outbursts than the equity and foreign exchange markets did.

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Bibliographic Info

Article provided by Elsevier in its journal Review of Financial Economics.

Volume (Year): 21 (2012)
Issue (Month): 3 ()
Pages: 120-130

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Handle: RePEc:eee:revfin:v:21:y:2012:i:3:p:120-130

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Web page: http://www.elsevier.com/locate/inca/620170

Related research

Keywords: Tail risk; Systemic risk; Financial crisis; EU Member States;

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References

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Cited by:
  1. Gabrisch, Hurbert & Orlowski, Lucjan & Pusch, Toralf, 2012. "Sovereign Default Risk in the Euro-Periphery and the Euro-Candidate Countries," Working Papers 2012002, Sacred Heart University, John F. Welch College of Business.

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