Article ID Journal Published Year Pages File Type
5088472 Journal of Banking & Finance 2016 12 Pages PDF
Abstract

We propose a novel risk measure that relates to subsequent negative conditional stock market returns. Our risk measure considers both the fragility and stress of the market. Fragility is measured by the Fragility Index developed by Berger and Pukthuanthong (2012) and market stress is based on several economic variables. Results show that incorporating both market stress and fragility improves the information content of a risk measure. Our risk measure relates to poor subsequent monthly market returns. We show the risk measure contains predictive information in a purely ex-ante specification.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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