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Disentangling crashes from tail events

Author

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  • Sofiane Aboura

    (CEREG - Centre de Recherche sur la gestion et la Finance - DRM UMR 7088 - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

The study of tail events has become a central preoccupation for academics, investors and policy makers, given the recent financial turmoil. However, what differentiates a crash from a tail event? This article answers this question by taking a risk management perspective that is based on an augmented extreme value theory methodology with an application to the French stock market (1968-2008). In contrast with the common sense, it claims that crashes happen when the volatility is the lowest. Our empirical results indicate that the French stock market experienced only two crashes in 2007-2008 among the 12 identified over the whole period.

Suggested Citation

  • Sofiane Aboura, 2010. "Disentangling crashes from tail events," Working Papers halshs-00638072, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00638072
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00638072
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    Cited by:

    1. Sofiane Aboura, 2016. "Individual investors and stock returns," Journal of Asset Management, Palgrave Macmillan, vol. 17(7), pages 477-485, December.
    2. Polanski, Arnold & Stoja, Evarist & Chiu, Ching-Wai (Jeremy), 2019. "Tail risk interdependence," Bank of England working papers 815, Bank of England.

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