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Abstract

In this paper we establish empirical evidence for the relationship between the systematic jump betas of financial institutions and two types of systemic risk index: a capital shortfall index and a interconnectedness index. Using high‐frequency data for US financial sector stocks, we show that equity market jumps are positively related to capital shortfall and negatively related to interconnectedness. Higher potential capital shortfall measures of systemic risk lead to a greater sensitivity to systematic jumps, while increased interconnectedness leads to greater resistance. Our findings, along with indicators such as size and leverage, provide a means to identify the possible trade‐offs that regulators might face when assessing the systemic risks of financial institutions, particularly in the context of the cross‐multiple influences within the sector.

Item Type:	Article
Authors/Creators:	Gajurel, D and Dungey, M and Yao, W and Jeyasreedharan, N
Journal or Publication Title:	Economic Record
Publisher:	Wiley-Blackwell Publishing Asia
ISSN:	0013-0249
DOI / ID Number:	10.1111/1475-4932.12565
Copyright Information:	Copyright 2020 Economic Society of Australia
Related URLs:	Google Scholar: Dungey, M UTAS Profile: Dungey, M Google Scholar: Jeyasreedharan, N UTAS Profile: Jeyasreedharan, N
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