TY  - JOUR
AU  - Billio,Monica
AU  - Getmansky,Mila
AU  - Lo,Andrew W.
AU  - Pelizzon,Loriana
TI  - Econometric Measures of Systemic Risk in the Finance and Insurance Sectors
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16223
PY  - 2010
Y2  - July 2010
UR  - http://www.nber.org/papers/w16223
L1  - http://www.nber.org/papers/w16223.pdf
N1  - Author contact info:
Monica Billio
Univesity Ca' Foscari of Venice
E-Mail: billio@unive.it

Mila Getmansky
Isenberg School of Management
Room 308C
Universtiy of Massachusetts
121 Presidents Drive, Amherst, MA 01003
Tel: 413-577-3308
Fax: 413-545-3858
E-Mail: msherman@isenberg.umass.edu

Andrew W. Lo
MIT Sloan School of Management
100 Main Street, E62-618
Cambridge, MA  02142
Tel: 617/253-0920
Fax: 781/891-9783
E-Mail: alo@mit.edu

Loriana Pelizzon
University of Venice
Department of Economics
Cannareggio 873
Venice, 30100 ITALY
E-Mail: pelizzon@unive.it
M3  - presented at "Market Institutions and Financial Market Risk", June 17-18, 2010
AB  - We propose several econometric measures of systemic risk to capture the interconnectedness among the monthly returns of hedge funds, banks, brokers, and insurance companies based on principal components analysis and Granger-causality tests. We find that all four sectors have become highly interrelated over the past decade, increasing the level of systemic risk in the finance and insurance industries.  These measures can also identify and quantify financial crisis periods, and seem to contain predictive power for the current financial crisis.  Our results suggest that hedge funds can provide early indications of market dislocation, and systemic risk arises from a complex and dynamic network of relationships among hedge funds, banks, insurance companies, and brokers.
ER  -