A1354
Title: Systemic-systematic risk in financial system: A dynamic ranking based on expectiles
Authors: Laura Garcia-Jorcano - Universidad de Castilla-La Mancha (Spain) [presenting]
Lidia Sanchis-Marco - University of Castilla-La Mancha (Spain)
Abstract: An international dynamic ranking comparison for systematic and systemic risk in the financial system is provided based on a coherent downside risk measure, the expected shortfall (ES) computed from expectiles. This approach has the advantage of avoiding distributional assumptions and providing a more efficient estimation procedure than using quantiles. From these ES, estimates are obtained for static and dynamic, systematic and systemic rankings for different banks, insurances and financial services institutions by using principal component. In general, it is expected that this new approach is competitive, because it is more sensitive to the magnitude of extremes losses than conventional quantiles. The main evidence is that banks are more systemic and systematic in periods of crisis, but in quiet periods (pre and post) insurances are more systemic and systematic. For countries, institutions from Asia are more systematic than systemic and from Europe and North America more systemic than systematic. In the crisis, North American institutions are less systematic and systemic, while Asian are more systematic and systemic. These results have implications for supervisors regarding the regulation of financial firms and for investors regarding diversifiable and non-diversifiable risks in their portfolios. Moreover, it is provided additional evidence on the necessity of macro and micro-prudential regulation not only in the banking sector but also in the insurance sector.
