On the ranking consistency of global systemic risk measures: empirical evidence, by Michael Abendschein and Peter Grundke
We empirically analyze to which extent popular global systemic risk measures (SRMs) yield comparable results with respect to the systemic importance of a financial institution and, in particular, from which determinants the degree of consistency of the classification by the various SRMs depends. In this study, we investigate the rank correlations of SRMs in order to detect common drivers that might explain (in-)consistent ranking outcomes. This could allow to facilitate the interpretation of the outcome of SRMs and to increase the reliability of their usage in academic and practical applications. Our results show that rank correlations are particularly sensitive towards a bank’s leverage and towards tightening economic conditions, in particular during high-volatility periods. This finding holds across various different specifications.
Keywords: systemic risk, risk rankings, financial regulation
JEL classifications: G01, G21, G28, G32