Time-Varying Crash Risk: The Role of Stock Market Liquidity

Peter Christoffersen, Bruno Feunou, Yoontae Jeon & Chayawat Ornthanalai
We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model. This finding suggests that the relationship between variance and jump risk found in the literature is largely...
This data repository is not currently reporting usage information. For information on how your repository can submit usage information, please see our documentation.