Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023
We assess the efficacy of market-based systemic risk measures that rely on U.S. financial firms’ stock return co-movements with market- or sector-wide returns under stress from 1895 to 2023. Stress episodes are identified using corporate bond spread widening and narrative dating, spanning from the Panic of 1907 to the Banking Stress of 2023. Measures observed prior to the onset of stress episodes predict market outcomes (realized volatility and returns), balance sheet outcomes (lending, profitability, and run risk), and bank failures. Specifically, the measures are: (i) particularly effective in capturing the cross-sectional ranking of institutions conditional on a stress episode, rather than aggregate outcomes; (ii) more informative when stress episodes are severe; and (iii) relevant for both banks and non-bank financial institutions, although measures incorporating market leverage are especially informative for banks. A comparative analysis shows that market-based indicators offer information that is distinct from, and complementary to, traditional balance sheet metrics used in supervisory and macroprudential risk assessment.
-
-
Copy CitationViral V. Acharya, Markus K. Brunnermeier, and Diane Pierret, "Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023," NBER Working Paper 33211 (2024), https://doi.org/10.3386/w33211.Download Citation
-
Published Versions
Viral V. Acharya & Markus K. Brunnermeier & Diane Pierret, 2025. "Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023," Annual Review of Financial Economics, Annual Reviews, vol. 17(1), pages 1-26, November, DOI: 10.1146/annurev-financial-112823-01. citation courtesy of 
Viral V. Acharya & Markus K. Brunnermeier & Diane Pierret, 2025. "Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023," Annual Review of Financial Economics, vol 17(1), pages 1-26.
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—the NBER Reporter, the NBER Digest, the Bulletin on Health, the Bulletin on the Economics of Alzheimer's, and the Bulletin on Entrepreneurship—as well as research spotlights, lectures, and panel videos.
