Research Output per year
Motivated by asset pricing theory with safety-first preference, we introduce and operationalize an ex ante conditional extreme risk (CER) measure which describes expected stock performance conditional on a potential small-probability market downturn (black swan). CER is positively priced in the cross-section of stock returns, especially when large-scale market calamities are predicted. It also largely subsumes the premia to downside beta, coskewness, and cokurtosis. Different from co-crash-based tail dependence measures, CER provides extra information regarding black swan hedging when the market plunges but the individual stock does not, and it has a greater impact on asset prices among stocks with the black swan hedging property manifesting more prominently.
|Number of pages||64|
|Publication status||Published - 23 Jun 2015|
|Event||2015 Financial Management Association Asian Meeting - Seoul National University, Seoul, Korea, Republic of|
Duration: 23 Jun 2015 → 25 Jun 2015
|Conference||2015 Financial Management Association Asian Meeting|
|Country||Korea, Republic of|
|Period||23/06/15 → 25/06/15|
- Conditional extreme risk
- Black swan hedging
- Extreme value theory
- Asset pricing
WU, F. H., Sep 2020, In : Journal of Empirical Finance. 58, p. 412-435 24 p.
Research output: Journal Publications › Journal Article (refereed)
Ghon RHEE, S., & WU, F. (2015). Conditional extreme risk, black swan hedging, and asset prices. Paper presented at 2015 Financial Management Association Asian Meeting, Seoul, Korea, Republic of. http://www.fmaconferences.org/Seoul/Papers/RheeWu.pdf