__smbhome.uscs.susx.ac.uk_tjk30_Documents_s10640-019-00385-0.pdf (2.17 MB)
Can variations in temperature explain the systemic risk of European firms?
Version 2 2023-06-07, 08:30
Version 1 2023-06-07, 06:46
journal contribution
posted on 2023-06-07, 08:30 authored by Panagiotis Tzouvanas, Renatas Kizys, Ioannis Chatziantoniou, Roza SagitovaWe employ a ?CoVaR model in order to measure the potential impact of temperature fluctuations on systemic risk, considering all companies from the STOXX Europe 600 Index, which covers a wide range of industries for the period from 1/1/1990 to 29/12/2017. Furthermore, in this study, we decompose temperature into 3 factors; namely (i) trend, (ii) seasonality and (iii) anomaly. Findings suggest that, temperature has indeed a significant impact on systemic risk. In fact, we provide significant evidence of either positive or nonlinear temperature effects on financial markets, while the nonlinear relationship between temperature and systemic risk follows an inverted U-shaped curve. In addition, hot temperature shocks strongly in-crease systemic risk, while we do witness the opposite for cold shocks. Additional analysis shows that deviations of temperature by 1?C can increase the daily Value at Risk by up to 0.24 basis points. Overall, higher temperatures are highly detrimental for the financial system. Results remain robust under the different proxies that were employed to capture systemic risk or temperature.
History
Publication status
- Published
File Version
- Published version
Journal
Environmental and Resource EconomicsISSN
0924-6460Publisher
SpringerExternal DOI
Issue
4Volume
74Page range
1723-1759Department affiliated with
- Accounting and Finance Publications
Research groups affiliated with
- Business and Finance Research Group Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2019-10-23First Open Access (FOA) Date
2019-11-26First Compliant Deposit (FCD) Date
2019-11-26Usage metrics
Categories
No categories selectedLicence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC