Federal Reserve Bank of Chicago
Working Paper Series
Backtesting Systemic Risk Measures During Historical Bank Runs
The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these questions is to take backtesting seriously and evaluate how useful the recently proposed measures are when applied to historical crises. Ideally, one would like to look at the pre-FDIC era for a broad enough sample of financial panics to confidently assess the robustness of systemic risk measures but pre-FDIC era balance sheet and bank stock price data were heretofore unavailable. We rectify this data shortcoming by employing a recently collected financial dataset spanning the 60 years before the introduction of deposit insurance. Our data includes many of the most severe financial panics in U.S. history. Overall we find CoVaR and SRisk to be remarkably useful in alerting regulators of systemically risky financial institutions.
Cite this item
Christian Brownlees & Benjamin Chabot & Eric Ghysels & Christopher J. Kurz, Backtesting Systemic Risk Measures During Historical Bank Runs, Federal Reserve Bank of Chicago, Working Paper Series WP-2015-9, 02 Jul 2015.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
Keywords: Financial crisis; Systemic risk; Stress testing; credit risk; High-frequency data
This item with handle RePEc:fip:fedhwp:wp-2015-09
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