Title: The impact of the UK real estate sector on systemic risk
Authors: Ivan Paya - Lancaster University (United Kingdom) [presenting]
Efthymios Pavlidis - Lancaster University Management School (United Kingdom)
Alexandros Skouralis - Lancaster University (United Kingdom)
Abstract: The extent to which real estate (RE) firms contribute to the systemic risk of the banking and financial industries in the UK is examined. We employ a CoVaR/DeltaCoVaR approach to identify not only the contribution of individual firms to the risk of the overall banking and financial system, but also what are the main firm characteristics driving the result. Larger, riskier and more leveraged RE firms appear to be the ones with a larger impact on systemic risk. We extend our analysis to a dynamic framework using four different methods that allow us to identify the periods where the effect on systemic risk is higher. We also employ an alternative, structural approach, to disentangle the marginal effects of housing market conditions, firm characteristics and macro variables on systemic risk.