We propose new systematic tail risk measures constructed using two different approaches.
The first is a non-parametric measure that captures the tendency of a stock to crash at the
same time as the market, while the second is based on the sensitivity of stock returns to
innovations in market crash risk. Both tail risk measures are ...
We propose new systematic tail risk measures constructed using two different approaches.
The first is a non-parametric measure that captures the tendency of a stock to crash at the
same time as the market, while the second is based on the sensitivity of stock returns to
innovations in market crash risk. Both tail risk measures are associated with a significantly
positive risk premium after controlling for other measures of downside risk, including
downside beta, coskewness and cokurtosis. Using the new measures, we examine the
relevance for investors of the tail risk premium over different horizons.
