NDLI: Tail Risks, Asset Prices, and Investment Horizons

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Tail Risks, Asset Prices, and Investment Horizons

Content Provider	Scilit
Author	Barunik, Jozef Nevrla, Mattj
Copyright Year	2018
Description	Journal: SSRN Electronic Journal We examine how extreme market risks are priced in the cross-section of asset returns at various horizons. Based on the frequency decomposition of covariance between indicator functions, we define the quantile cross-spectral beta of an asset capturing tail-specific as well as horizon, or frequency-specific risks. Further, we work with two notions of frequency-specific extreme market risks. First, we define tail market risk that captures dependence between extremely low market as well as asset returns. Second, extreme market volatility risk is characterized by dependence between extremely high increments of market volatility and extremely low asset return. Empirical findings based on the datasets with long enough history, 30 Fama-French Industry portfolios, and 25 Fama-French portfolios sorted on size and book-to-market support our intuition. Results suggest that both frequency-specific tail market risk and extreme volatility risks are significantly priced and our five-factor model provides improvement over specifications considered by previous literature.
Related Links	https://www.econstor.eu/bitstream/10419/203229/1/1666497886.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3197408
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3197408
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2018-06-15
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Asset Pricing Downside Risk Frequency-specific Risk Tail Risk
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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