Time-varying Crash Risk: The Role of Stock Market Liquidity

Peter Christoffersen, Bruno Feunoua, Yoontae Jeon, Chayawat Ornthanalai

Publikation: Working paperForskning

Abstract

We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.
OriginalsprogEngelsk
UdgivelsesstedOttowa, ON
UdgiverBank of Canada
Antal sider53
StatusUdgivet - jul. 2016
NavnStaff Working Paper / Bank of Canada
Nummer2016-35
ISSN1701-9397

Emneord

  • Asset pricing
  • Financial stability
  • Econometric and statistical methods

Citationsformater