Arbeitspapier
Time-varying crash risk: The role of stock market liquidity
We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model. This finding suggests that the relationship between variance and jump risk found in the literature is largely due to their common exposure to market liquidity risk. Our study highlights the importance of equity market frictions in index return dynamics and explains why prior studies find that crash risk increases with market uncertainty level.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2016-35
- Klassifikation
-
Wirtschaft
Financial Crises
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
-
Asset pricing
Financial stability
Econometric and statistical methods
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Christoffersen, Peter F.
Feunou, Bruno
Jeon, Yoontae
Ornthanalai, Chayawat
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2016
- DOI
-
doi:10.34989/swp-2016-35
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Christoffersen, Peter F.
- Feunou, Bruno
- Jeon, Yoontae
- Ornthanalai, Chayawat
- Bank of Canada
Entstanden
- 2016
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