Measuring systemic risk during the COVID-19 period: A TALIS3 approach

Massimiliano Caporin; Laura Garcia-Jorcano; Juan-Angel Jimenez-Martin

doi:10.1016/j.frl.2021.102304

Measuring systemic risk during the COVID-19 period: A TALIS³ approach

Financ Res Lett. 2022 May:46:102304. doi: 10.1016/j.frl.2021.102304. Epub 2021 Jul 17.

Authors

Massimiliano Caporin¹, Laura Garcia-Jorcano², Juan-Angel Jimenez-Martin³

Affiliations

¹ Department of Statistical Sciences, University of Padova, Padova, Italy.
² Department of Economic Analysis and Finance (Area of Financial Economics), Facultad de Ciencias Jurídicas y Sociales, Universidad de Castilla-La Mancha, Toledo, Spain.
³ Instituto Complutense de Análisis Económico (ICAE) and Department of Economic Analysis, Facultad de Ciencias Económicas y Empresariales, Campus de Somosaguas, Universidad Complutense, Madrid, Spain.

Abstract

The rapid spread of COVID-19 has had severe impacts on financial markets. We analyzed the systemic impact of the COVID-19 pandemic in different supersectors of STOXX600 North America and the STOXX600 Europe, using the TrAffic Light System for Systemic Stress (TALIS $^{3}$ ) approach which provides a comprehensive color-based classification for grouping sectors according to system and sector stress level. We contrasted the financial markets' reaction in North America and Europe, noticing that in Europe the systemic impact has been more persistent during March-May 2021. By evaluating the sectorial contribution to market risk, we observed heterogeneity between North America and Europe.

Keywords: COVID-19; CoVaR; Sectorial indices; Systemic risk.