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Tail Risk Transmission: A Study of Iran Food Industry

Author

Listed:
  • Fatemeh Mojtahedi

    (Sari Agricultural Sciences and Natural Resources University)

  • Seyed Mojtaba Mojaverian

    (Sari Agricultural Sciences and Natural Resources University)

  • Daniel Felix Ahelegbey

    (Università di Pavia)

  • Paolo Giudici

    (Università di Pavia)

Abstract

This paper extends the extreme downside correlations and hedge (EDC and EDH) methodology of Harris et al. (2019) to model the tail risk co-movement of financial assets under severe firm-level and market conditions. The model is applied to analyze both systematic and systemic exposures in the Iranian food industry. The empirical application address the following questions: 1) which food company is the safest for investors to diversify their investment, and 2) which companies are the risk “transmitters” and “receivers”, especially in turbulent times. To this end, we sampled the time series of 11 manufacturing companies and proxy the market indicator with the food industry index, all of which are publicly listed on the Tehran Stock Exchange (TSE). The data covers daily close prices from October 5, 2015, to January15, 2020. The systematic analysis reveals a positive and statistically significant relationship between the tail risk of the companies and the market index. The centrality analysis of the systemic exposures reveals Mahram Manufacturing as the safest and Behshahr Industries as the riskiest company. We also find evidence that W.Azar.Pegah is the main “transmitter” of tail risk, while Pegah.Fars.Co is the main “receiver” of risk.

Suggested Citation

  • Fatemeh Mojtahedi & Seyed Mojtaba Mojaverian & Daniel Felix Ahelegbey & Paolo Giudici, 2020. "Tail Risk Transmission: A Study of Iran Food Industry," DEM Working Papers Series 189, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0189
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    References listed on IDEAS

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    Cited by:

    1. Daniel Felix Ahelegbey, 2022. "Statistical Modelling of Downside Risk Spillovers," FinTech, MDPI, vol. 1(2), pages 1-10, April.

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    More about this item

    Keywords

    Food industry; Extreme downside hedge; Extreme downside correlation; Systematic risk; Systemic risk.;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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