The tail risk of emerging stock markets

Article history: Received 7 August 2009 Received in revised form 10 September 2009 Accepted 10 September 2009 Available online 19 September 2009 We investigate tail risk in emerging stock markets at the country, regional and world levels, by comparing the investable and noninvestable segments in terms of the expected shortfall of standardized returns and tail dependence on the world market. Employing the skewed Student-tGJR-GARCHmodel and the SJC copula, we show that most investable portfolios have lower tail risk but higher tail dependence than non-investable ones; emerging markets are likely more dependent on the world market during large joint losses than large joint gains; and tail dependence of the aggregate and investable markets on the world market varies across countries and regions. © 2009 Elsevier B.V. All rights reserved. JEL classification: G1 F3 C4