FINTECH THRUST SEMINAR | The Granular Origins of Tail Dispersion Risk
The Granular Origins of Tail Dispersion Risk
Abstract:
We study tail risk in the cross-section of asset prices at high frequencies. The tail behavior of the cross-section depends on whether a systematic jump event occurred. If so, the cross-sectional return tail is governed by assets’ exposures to the systematic event while, otherwise, it is determined by idiosyncratic jumps. An estimator for the tail shape of the cross-sectional distribution displays distinct properties with and without systematic jumps. We show empirically that shocks to the cross-sectional tail shape are a source of priced risk: fat idiosyncratic tails are favored by investors, while fat-tailed exposures to systematic jumps are disliked.
Dr. Ding is an Assistant Professor of Business Economics at the Faculty of Business Administration at the University of Macau. She received her Ph.D. degree in Business Statistics from the Hong Kong University of Science and Technology and her Bachelor of Science degree in Mathematics and Applied Mathematics from Tsinghua University. Before joining the University of Macau, Dr. Ding worked as a Research Assistant Professor in the Department of Applied Mathematics at Hong Kong Polytechnic University. Her research focuses on the study of financial big data, financial econometrics, and high-dimensional statistics. Dr. Ding has published papers in top academic journals such as The Annals of Statistics, the Journal of the American Statistical Association, and the Journal of Econometrics. She has been the principal investigator of research projects funded by the Macau Science and Technology Development Fund, Hong Kong Research Grant Council, and the National Natural Science Foundation of China.