Extreme U.S. Stock Market Fluctuations in the Wake of 9/11

S.T.M. Straetmans, C.C.P. Wolff*, W.F.C. Verschoor

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


We apply extreme value analysis to us sectoral stock indices in order to assess whether tail risk measures like value-at-risk and extremal linkages were significantly altered by 9/11. We test whether semi-parametric quantile estimates of ‘downside risk’ and ‘upward potential’ have increased after 9/11. The same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio. The latter probabilities measure the sectoral response to macro shocks during periods of financial stress (so-called ‘tail-ßs’). Taking 9/11 as the sample midpoint we find that tail-ßs often increase in a statistically and economically significant way. This might be due to perceived risk of new terrorist attacks.
Original languageEnglish
Pages (from-to)17-42
Number of pages26
JournalJournal of Applied Econometrics
Issue number1
Publication statusPublished - 1 Jan 2008


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