Extreme US stock market fluctuations in the wake of 9/11

We apply extreme value analysis to US sectoral stock indices in order to assess whether tail risk measures like value-at-risk and extremal linkages were significantly altered by 9/11. We test whether semi-parametric quantile estimates of 'downside risk' and 'upward potential' hav...

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Published in:Journal of applied econometrics (Chichester, England) England), 2008-01, Vol.23 (1), p.17-42
Main Authors: Straetmans, S. T. M., Verschoor, W. F. C., Wolff, C. C. P.
Format: Article
Language:English
Subjects:
Econometric models
Economic indices
Economic shock
Estimators
Financial crisis
Financial economics
Investment risk
Nasdaq Composite Index
Parameter estimation
Probabilities
Quadrants
Risk assessment
Securities markets
September 11
September 11 terrorist attacks-2001
Significance level
Stock exchange
Stock market indices
Stock markets
Stock prices
Studies
Terrorism
Time series
U.S.A
Value analysis
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description We apply extreme value analysis to US sectoral stock indices in order to assess whether tail risk measures like value-at-risk and extremal linkages were significantly altered by 9/11. We test whether semi-parametric quantile estimates of 'downside risk' and 'upward potential' have increased after 9/11. The same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio. The latter probabilities measure the sectoral response to macro shocks during periods of financial stress (so-called 'tail-βs'). Taking 9/11 as the sample midpoint we find that tail-βs often increase in a statistically and economically significant way. This might be due to perceived risk of new terrorist attacks.
doi_str_mv 10.1002/jae.973
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source Wiley-Blackwell Journals; International Bibliography of the Social Sciences (IBSS); JSTOR Archival Journals and Primary Sources Collection
subjects Econometric models
Economic indices
Economic shock
Estimators
Financial crisis
Financial economics
Investment risk
Nasdaq Composite Index
Parameter estimation
Probabilities
Quadrants
Risk assessment
Securities markets
September 11
September 11 terrorist attacks-2001
Significance level
Stock exchange
Stock market indices
Stock markets
Stock prices
Studies
Terrorism
Time series
U.S.A
Value analysis
title Extreme US stock market fluctuations in the wake of 9/11
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