Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154308
Authors: 
Nucera, Federico
Schwaab, Bernd
Koopman, Siem Jan
Lucas, André
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1875
Abstract: 
We propose to pool alternative systemic risk rankings for financial institutions using the method of principal components. The resulting overall ranking is less affected by estimation uncertainty and model risk. We apply our methodology to disentangle the common signal and the idiosyncratic components from a selection of key systemic risk rankings that have been proposed recently. We use a sample of 113 listed financial sector firms in the European Union over the period 2002-2013. The implied ranking from the principal components is less volatile than most individual risk rankings and leads to less turnover among the top ranked institutions. We also find that price-based rankings and fundamentals-based rankings deviated substantially and for a prolonged time in the period leading up to the financial crisis. We test the adequacy of our newly pooled systemic risk ranking by relating it to credit default swap premia.
Subjects: 
banking supervision
financial regulation
forecast combination
risk rankings
systemic risk contribution
JEL: 
E
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-1688-2
Document Type: 
Working Paper

Files in This Item:
File
Size
562.37 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.