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CF Weekly Workshop - Jamie Alcock

When Oct 25, 2011
from 05:00 PM to 06:00 PM
Where Room 7, Lecture Block, Sidgwick Site
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Talk by Dr Jamie Alcock

Title: The Price of Asymmetric Dependence

Abstract:

We examine the relative importance of asymmetric dependence (AD) and systematic risk

in the cross-section of US equities. Using a β-invariant AD metric, we demonstrate a

lower-tail dependence premium that is only 35% of the market risk premium, compared

with an upper-tail dependence discount that is 41% of the market risk premium. Lowertail

dependence displays a constant price between 1989-2009. Subsequently, we find that

return changes in US equities between 2007-2009 reflected changes in systematic risk

and upper-tail dependence. This suggests that both systematic risk and AD should be

managed in order to reduce the return impact of market downturns.

Key words: Asymmetric dependence, asset pricing, tail risk, downside risk, systematic

risk.

JEL: G12

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