Tail risk measure predicts financial crises and spillovers in major banks.
The article discusses new ways to measure and predict extreme events in financial markets and economic growth. The researchers introduce a measure called TailCoR to capture both linear and non-linear correlations during crises. They find that co-movement among major US banks increased during the financial crisis due to both types of correlations. Additionally, they identify non-normal shocks in economic models to better understand structural changes. The study also uses a Bayesian model to predict Norwegian GDP growth.