Idiosyncratic Tail Risk,Systemic Tail Risk And Theirs Cross Pricing

This paper mainly considers the tail risk of risky assets or the impact of loss risk on the expected return of assets.Second-order lower parity(LPM)is used to measure the tail risk of risky assets.The core of this paper is to analyze the pricing ability of tail risk on China's A-share market assets' expected return,adopt LPM method to measure the daily-risk tail-risk of China's A-share market,and build individual stocks and market's investment portfolio one by one,combining the tail risk of the portfolio.Decomposed into three parts.One part is the tail stock risk associated with individual stocks only,the other is the system-related tail risk only,and the last part is the hybrid tail risk related to stocks and the market.After discussing the relationship between the three types of tail risk,this paper studies the relationship between the three types of tail risk and the expected return of assets.First of all,this paper preliminarily statistics the expected return level of the asset portfolio under different levels of three types of tail risk,and intuitively describes the internal relationship between different tail risk and the expected return of assets and various control variables.Secondly,on this basis,in order to discover the unique pricing power of different tail risks,it is analyzed whether it has the effect that other risk factors cannot explain.This article uses Fama-Mac Beth's method to cross-sectionally return tail risk with expected returns every month.In the specific analysis,the ability to interpret the expected risk of the asset's expected return after the tail of the standard four factors and the cross-sectional pricing ability of the tail risk after controlling all the control variables are separately discussed.Then,this paper focuses on further testing the pricing ability of the hybrid tail risk in the cross-section,focusing on the more nature of the mixed tail risk,and testing the risk of mixed tail risk on the expected return of assets under different conditions from the persistence and data dependence.Whether the cross-section prediction is equally valid.In addition,this article attempts to standardize the measure of the risk of mixed tails by defining a new measure to mix the tails of the beta,using the Fama-French Chart four-factor alpha significance of the mixed tail beta,and the ability to cross-tail pricing the risk of the mixed tail.A more in-depth examination was conducted.The above analysis has comprehensively examined the cross-section pricing effects of the three types of tail risk in the expected return on assets,but the potential interaction between tail risk and other risk control factors has not been thoroughly discussed,so it isrobust in this paper.In the sexual test,the potential effects of other control variables were excluded through cross-control,and the prediction effect of the tail risk on the expected return of the section was examined.Further,this article excludes stocks under extreme conditions for robust tests.This paper uses the data from April 1992 to May 2016 of China's A-share market to study the pricing function of three kinds of tail risk on the expected return of assets.The Fama-MacBeth cross-sectional regression based on the stock data of China's A-share market has obtained some important findings:(1)Heterogeneous tail risk has a significant negative correlation with expected return on assets,which is similar to idiosyncratic volatility andThe relationship between the expected return on assets.However,it was further found that,on the one hand,the idiosyncratic of tail risk and the idiosyncratic volatility were weakly positively correlated;on the other hand,when the idiosyncratic tail risk and idiosyncratic volatility were both used as explanatory variables,Idiosyncratic tail risk The negative pricing effect has not weakened,and the explanatory power of the idiosyncratic volatility has obviously weakened.This shows that the idiosyncratic tail risk not only bears the major risk factors in the idiosyncratic volatility,but also captures the idiosyncratic fluctuations.The rate did not capture the risk factor.Because the relationship between the idiosyncratic tail risk and the expected return of risky assets is still contrary to the theoretically positive correlation between risk and return,and at the same time different from the pricing effect of idiosyncratic fluctuation rate on the expected return of risky assets,in this sense.For the first time,this article is called "Heterogeneous Tail Risk Mystery."(2)The tail risk of the market index(we call it systematic tail risk)has no obvious impact on the expected return of the assets.Compared with the impact of the beta coefficient and the lower beta of the CAPM model on the expected return of assets,the system based on the LPM metrics.The tail risk is less affected by the expected impact of the assets.(3)The hybrid tail risk consists of the idiosyncratic tail risk and the systematic tail risk cross has a significant positive correlation with the expected return of the assets,and has a very significant positive pricing effect on the expected return of the assets,ie the high hybrid tail risk,With high expected return.This shows that the use of LPM to measure the risk of mixed tail can capture the risk of loss of risk assets and help explain investors' compensation requirements for risk assets.Therefore,the mixed risk includes both the risk factors that are not included in the idiosyncratic tail risk and the factors that cannot be captured by thesystemic risk.It completely exceeds the pricing effect of the idiosyncratic tail risk and the systemic tail risk on the expected return of the risk assets respectively..(4)The Fama-French-Carhart four-factor model,which consists of market factors,book-to-market ratio factors,scale factors,and momentum factors,was used to test and found that the four-factor model could not explain the negative correlation between idiosyncratic tail risk and expected asset return.Nor does it fully explain the positive correlation between the mixed trailing risk and the expected return,which indicates that the heterogeneous tail risk and the hybrid trailing risk both capture the risk factors that cannot be explained by the Fama-French-Carhart factor.