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Title: Measurement of common risk factors: A panel quantile regression models for returns and volatility Authors:  Frantisek Cech - UTIA AV CR, v.v.i. (Czech Republic) [presenting]
Jozef Barunik - UTIA AV CR vvi (Czech Republic)
Abstract: The common risk factors are proposed to be measured using panel quantile regression models for returns and volatility. By exploring the fact that volatility crosses all quantiles of the return distribution, and employing panel quantile regressions, we focus on the commonalities in the quantiles of the returns in a selected portfolio. In the forecasting exercise we show that the proposed approach is able to model lower quantiles of the return distribution more precisely as widely used benchmark models. Results of our research are important for correct identification of the sources of systemic risk, and will be particularly attractive for relatively high dimensional applications for dimensionality reduction and better portfolio optimization.