On the determinants of tail risk

Abstract

This paper aims to describe tail risk dynamics in the U.S equity market and put it in context of ESG practices. By estimating a firm-specific conditional tail index, the paper looks at the different dynamics that firm-specific characteristics play in the cross-section of firms with different loadings of Reputational Risk. The graphical evidence presented suggests that firms tail risk with lower Reputational Risk, indeed are less likely to be affected by market wide uneasiness.