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Tail risk in international markets

Page: 1-56
2016
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Thesis / Dissertation Description

Tail risk, defined as extreme event risk in asset markets, is an important consideration for investors when making investment decisions. This paper empirically tests the role of tail risk in international market. Using sample of 40 countries from 1980 to 2014, I show that tail risk positively predicts future market returns. Across all countries, stocks with high sensitivity to past global tail risk on average will earn higher returns than stocks with low sensitivity. In addition, I show that tail risk act as a global transmission channel of contagion during crisis.

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