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The impact of equity tail risk on European markets

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Resumo:I apply a dynamic equity tail risk variable to equity and government bond returns in Europe, understanding how investors react upon an increase in market uncertainty, departing from a risk aversion premise. I show that tail risk has predictive power for market returns, but less significantly than in the US. Nevertheless, the cross-sectional analysis provides evidence that investors demand a higher return from stocks that co-move more with tail risk, and the government bond analysis demonstrates that the yield-to maturity of safer bonds decreases upon an increase in equity tail risk, a sign of investors’ flight to safety, in uncertain times.
Autores principais:Conduto, Miguel dos Prazeres
Assunto:Tail risk Risk aversion Equity markets Government bonds
Ano:2023
País:Portugal
Tipo de documento:dissertação de mestrado
Tipo de acesso:acesso aberto
Instituição associada:Universidade Nova de Lisboa
Idioma:inglês
Origem:Repositório Institucional da UNL

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