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This paper gives new insights about flight-to-safety from stocks to bonds, asking whether the strength of this phenomenon remains the same in the current environment of low yields. The motivations lie in the conjecture that when yields are low, the traditional motives of flight-to-safety (wealth protection, liquidity) could not be sufficient, inducing weaker flight-to-safety events. Empirical applications using data for U.S. government bonds and the S&P 500 index, show indeed that when yields are low, the strength of flight-to-safety from stocks to bonds weakens. This result holds, even when controlling for the effects of traditional flight-to-safety factors including the VIX, the TED spreads and the overall level of illiquidity in the stock market. Moreover, we develop a bivariate model of flight-to-safety transfers that measures to what extent the strength of flight-to-safety from stocks to bonds is related to the strength of flight-to-safety from stocks to other safe haven assets (gold and currencies). Results show that when the strength of flight-to-safety from stocks to bonds decreases the strength of flight-to-safety from stocks to these safe haven assets increases. This result holds only in the low-yield environment, suggesting a kind of substitution effect of save haven assets, similar to the reaching for yield behavior.

This paper gives new insights about flight-to-safety from stocks to bonds, asking whether the strength of this phenomenon remains the same in the current environment of low yields. The motivations lie in the conjecture that when yields are low, the traditional motives of flight-to-safety (wealth protection, liquidity) could not be sufficient, inducing weaker flight-to-safety events. Empirical applications using data for U.S. government bonds and the S&P 500 index, show indeed that when yields are low, the strength of flight-to-safety from stocks to bonds weakens. This result holds, even when controlling for the effects of traditional flight-to-safety factors including the VIX, the TED spreads and the overall level of illiquidity in the stock market. Moreover, we develop a bivariate model of flight-to-safety transfers that measures to what extent the strength of flight-to-safety from stocks to bonds is related to the strength of flight-to-safety from stocks to other safe haven assets (gold and currencies). Results show that when the strength of flight-to-safety from stocks to bonds decreases the strength of flight-to-safety from stocks to these safe haven assets increases. This result holds only in the low-yield environment, suggesting a kind of substitution effect of save haven assets, similar to the reaching for yield behavior.

This paper gives new insights about flight-to-safety from stocks to bonds, asking whether the strength of this phenomenon remains the same in the current environment of low yields. The motivations lie in the conjecture that when yields are low, the traditional motives of flight-to-safety (wealth protection, liquidity) could not be sufficient, inducing weaker flight-to-safety events. Empirical applications using data for U.S. government bonds and the S&P 500 index, show indeed that when yields are low, the strength of flight-to-safety from stocks to bonds weakens. This result holds, even when controlling for the effects of traditional flight-to-safety factors including the VIX, the TED spreads and the overall level of illiquidity in the stock market. Moreover, we develop a bivariate model of flight-to-safety transfers that measures to what extent the strength of flight-to-safety from stocks to bonds is related to the strength of flight-to-safety from stocks to other safe haven assets (gold and currencies). Results show that when the strength of flight-to-safety from stocks to bonds decreases the strength of flight-to-safety from stocks to these safe haven assets increases. This result holds only in the low-yield environment, suggesting a kind of substitution effect of save haven assets, similar to the reaching for yield behavior.

À la suite de la dernière crise financière sévère, plusieurs mesures de risque systémique ont été proposées pour quantifier l'état de stress du système financier. Dans cet article, nous proposons un indice agrégé de mesure de risque systémique financier basé sur une analyse en composantes principales dite « parcimonieuse ». Cette méthodologie permet d'obtenir un indice agrégé plus parcimonieux et plus stable dans le temps. L'application de la méthodologie à douze mesures de risque systémique global en utilisant des données des titres du marché financier américain confirme cette propriété. Il apparaît par ailleurs que les mouvements extrêmes positifs de l'indice de risque systémique ainsi construit peuvent être considérés comme des anticipations des périodes de forte contraction de l'activité économique.

This paper proposes a new duration-based backtesting procedure for VaR forecasts. The GMM test framework proposed by Bontemps (2006) to test for the distributional assumption (i.e. the geometric distribution) is applied to the case of the VaR forecasts validity. Using simple J-statistic based on the moments defined by the orthonormal polynomials associated with the geometric distribution, this new approach tackles most of the drawbacks usually associated to duration based backtesting procedures. First, its implementation is extremely easy. Second, it allows for a separate test for unconditional coverage, independence and conditional coverage hypothesis (Christoffersen, 1998). Third, feasibility of the tests is improved. Fourth, Monte-Carlo simulations show that for realistic sample sizes, our GMM test outperforms traditional duration based test. An empirical application for Nasdaq returns confirms that using GMM test leads to major consequences for the ex-post evaluation of the risk by regulation authorities. Without any doubt, this paper provides a strong support for the empirical application of duration-based tests for VaR forecasts.