Detalle Publicación


Granger causality and systemic risk

Autores: Balboa, M.; López Espinosa, Germán; Rubia, A.
Título de la revista: FINANCE RESEARCH LETTERS
ISSN: 1544-6123
Volumen: 15
Páginas: 49 - 58
Fecha de publicación: 2015
Building on the concept of Granger causality in risk in Hong et al. (2009), and focusing on an international sample of large-capitalization banks, we test for predictability in comovements in the left tails of returns of individual banks and the global system. The main results show that large individual shocks (defined as balance-sheet contractions exceeding the 1% VaR level) are a strong predictor of subsequent shocks in the global system. This evidence is particularly strong for US banks with large desks of proprietary trading. Similarly, we document strong evidence of financial vulnerabilities (exposures) to systemic shocks in US subprime creditors.