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Article
Financial Crisis and Extreme Market Risks: Evidence From Europe
WCBT Faculty Publications
  • Lucjan T. Orlowski, Sacred Heart University
Document Type
Peer-Reviewed Article
Publication Date
9-1-2012
Abstract

This study draws attention to the proliferation of extreme risks in financial markets prior to and during the course of the recent global financial crisis. It examines the level of such “tail” risks in selected equity, interbank lending and foreign exchange markets in selected EU Member States in relation to the United States. The extent of tail risks is assessed by applying general error distribution (GED) parameterization in GARCH volatility tests of the examined variables. The empirical tests prove that extreme market risks were pronounced across all of the examined European financial markets throughout the crisis. They were also significant prior to the crisis outbreak. The analyzed interbank lending markets exhibited more extreme volatility outbursts than the equity and foreign exchange markets did.

Comments

JEL Classification: E44, G15, G32.

DOI
10.1016/j.rfe.2012.06.006
Citation Information

Orlowski, L. (2012). Financial crisis and extreme market risks: Evidence from Europe. Review of Financial Economics, 21(3), 120-130. doi: 10.1016/j.rfe.2012.06.006