Skip to content
Back to outputs

Can variations in temperature explain the systemic risk of European firms?

Research output: Contribution to journalArticle

Standard

Can variations in temperature explain the systemic risk of European firms? / Tzouvanas, Panagiotis; Kizys, Renatas; Chatziantoniou, Ioannis; Sagitova, Roza.

In: Environmental and Resource Economics, Vol. 74, No. 4, 02.11.2019, p. 1723-1759.

Research output: Contribution to journalArticle

Harvard

Tzouvanas, P, Kizys, R, Chatziantoniou, I & Sagitova, R 2019, 'Can variations in temperature explain the systemic risk of European firms?', Environmental and Resource Economics, vol. 74, no. 4, pp. 1723-1759. https://doi.org/10.1007/s10640-019-00385-0

APA

Vancouver

Author

Tzouvanas, Panagiotis ; Kizys, Renatas ; Chatziantoniou, Ioannis ; Sagitova, Roza. / Can variations in temperature explain the systemic risk of European firms?. In: Environmental and Resource Economics. 2019 ; Vol. 74, No. 4. pp. 1723-1759.

Bibtex

@article{c63aff5c2ead4c84886b7c9df37ae7ee,
title = "Can variations in temperature explain the systemic risk of European firms?",
abstract = "We employ a ΔCoVaR 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 (1) trend, (2) seasonality and (3) 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 increase 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.",
keywords = "Conditional Value at Risk, Systemic risk, Climate change, Temperature",
author = "Panagiotis Tzouvanas and Renatas Kizys and Ioannis Chatziantoniou and Roza Sagitova",
year = "2019",
month = nov
day = "2",
doi = "10.1007/s10640-019-00385-0",
language = "English",
volume = "74",
pages = "1723--1759",
journal = "Environmental and Resource Economics",
issn = "0924-6460",
publisher = "Springer Netherlands",
number = "4",

}

RIS

TY - JOUR

T1 - Can variations in temperature explain the systemic risk of European firms?

AU - Tzouvanas, Panagiotis

AU - Kizys, Renatas

AU - Chatziantoniou, Ioannis

AU - Sagitova, Roza

PY - 2019/11/2

Y1 - 2019/11/2

N2 - We employ a ΔCoVaR 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 (1) trend, (2) seasonality and (3) 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 increase 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.

AB - We employ a ΔCoVaR 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 (1) trend, (2) seasonality and (3) 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 increase 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.

KW - Conditional Value at Risk

KW - Systemic risk

KW - Climate change

KW - Temperature

U2 - 10.1007/s10640-019-00385-0

DO - 10.1007/s10640-019-00385-0

M3 - Article

VL - 74

SP - 1723

EP - 1759

JO - Environmental and Resource Economics

JF - Environmental and Resource Economics

SN - 0924-6460

IS - 4

ER -

ID: 16181529