How systematic is default risk?

This study aims to provide an extensive analysis of systematic (market-wide) and systemic (sector-wide and industry-wide) components of the idiosyncratic default risk. We detect significant heterogeneity among the default risk structure of various industry groups. More specifically, the default probability of institutions affiliated with certain industry groups is more strongly linked to industry-wide risks while others are more heavily tied to sectorwide risks. We further show that systematic and systemic components of default risk alter also relative to up/down market cycles for each industry group. That is, the default risk of companies associated with certain industry groups proves systematic in both uptrends and downtrends whereas others induce the market risk during only bullish or bearish market states. We further consider a scenario where higher default risk of firms belonging to a specific industry group aggravates the sector risks other than its own and find that an increase in the default risk of various industry groups can in fact destabilize one or more sectors. We notice that the stability of firms within specific industry groups matter more than others for the health of an economy and the wealth of its participants, regardless of the market state while others carry weight with respect to market cycles. Our findings on the direct linkages between idiosyncratic default risk and systematic and systemic risks among financial and non-financial firms provide valuable insights for investors as well as policy makers.

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Detaylı Görünüm
Eser Adı
(dc.title)
How systematic is default risk?
Yazar [Asıl]
(dc.creator.author)
Dalgıç, Nihan
Yazar Departmanı
(dc.creator.department)
Yeditepe University Graduate School of Social Sciences
Yazar Departmanı
(dc.creator.department)
Yeditepe University Graduate School of Social Sciences Doctoral Program in Financial Economics
Yazar Orcid
(dc.creator.orcid)
0000-0001-5225-5599
Yayın Tarihi
(dc.date.issued)
2023
Yayın Turu [Akademik]
(dc.type)
preprint
Yayın Türü [Ortam]
(dc.format)
application/pdf
Konu Başlıkları [Genel]
(dc.subject)
Default risk
Konu Başlıkları [Genel]
(dc.subject)
Systematic risk
Konu Başlıkları [Genel]
(dc.subject)
Systemic risk
Konu Başlıkları [Genel]
(dc.subject)
Varsayılan risk
Konu Başlıkları [Genel]
(dc.subject)
Sistematik risk
Konu Başlıkları [Genel]
(dc.subject)
Sistemik risk
Yayıncı
(dc.publisher)
Yeditepe University Academic and Open Access Information System
Dil
(dc.language.iso)
eng
Özet Bilgisi
(dc.description.abstract)
This study aims to provide an extensive analysis of systematic (market-wide) and systemic (sector-wide and industry-wide) components of the idiosyncratic default risk. We detect significant heterogeneity among the default risk structure of various industry groups. More specifically, the default probability of institutions affiliated with certain industry groups is more strongly linked to industry-wide risks while others are more heavily tied to sectorwide risks. We further show that systematic and systemic components of default risk alter also relative to up/down market cycles for each industry group. That is, the default risk of companies associated with certain industry groups proves systematic in both uptrends and downtrends whereas others induce the market risk during only bullish or bearish market states. We further consider a scenario where higher default risk of firms belonging to a specific industry group aggravates the sector risks other than its own and find that an increase in the default risk of various industry groups can in fact destabilize one or more sectors. We notice that the stability of firms within specific industry groups matter more than others for the health of an economy and the wealth of its participants, regardless of the market state while others carry weight with respect to market cycles. Our findings on the direct linkages between idiosyncratic default risk and systematic and systemic risks among financial and non-financial firms provide valuable insights for investors as well as policy makers.
Kayıt Giriş Tarihi
(dc.date.accessioned)
2024-01-18

(dc.date.available)
2024-01-18
Haklar
(dc.rights)
Yeditepe University Academic and Open Access Information System
Erişim Hakkı
(dc.rights.access)
Open Access
Telif Hakkı
(dc.rights.holder)
Unless otherwise stated, copyrights belong to Yeditepe University. Usage permissions are specified in the Open Access System, and "InC-NC/1.0" and "by-nc-nd/4.0" are as stated.
Telif Hakkı Url
(dc.rights.uri)
http://creativecommons.org/licenses/by-nc-nd/4.0
Telif Hakkı Url
(dc.rights.uri)
https://rightsstatements.org/page/InC-NC/1.0/?language=en
Açıklama [Genel]
(dc.description)
Final published version
Açıklama [Not]
(dc.description.note)
Note: This preprint reports new research that has not been certified by peer review and should not be used as established information without consulting multiple experts in the field.
Tanım Koleksiyon Bilgisi
(dc.description.collectioninformation)
This item is part of the preprint collection made available through Yeditepe University library. For your questions, our contact address is openaccess@yeditepe.edu.tr
Yazar [KatkıdaBulunan]
(dc.contributor.author)
Alıcı, Zeynep Aslı
Yazar [KatkıdaBulunan] Kurum
(dc.contributor.institution)
Halic University Faculty of Business Administration
Tek Biçim Adres
(dc.identifier.uri)
https://hdl.handle.net/20.500.11831/8201
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