Measuring Tail Risks at High Frequency

• 成果类型: Article
• 署名作者: Weller, Brian M.
• 署名单位: Duke University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy133
• 发表日期: 2019
• 页码: 3571
• 关键词: liquidity; MARKET; INFORMATION; return; COMMONALITY; disasters; time

摘要

I exploit information in the cross-section of bid-ask spreads to develop a new measure of extreme event risk. Spreads embed tail risk information because liquidity providers require compensation for the possibility of sharp changes in asset values. I show that simple regressions relating spreads and trading volume to factor betas recover this information and deliver high-frequency tail risk estimates for common factors in stock returns. My methodology disentangles financial and aggregate market risks during the 2007-2008 financial crisis; quantifies jump risks associated with Federal Open Market Committee announcements; and anticipates an extreme liquidity shock before the 2010 Flash Crash.