Document de travail

Cyclicality and Term Structure of Value-at-Risk in Europe

Frédérique Bec et Christian Gollier


This paper explores empirically the link between stocks returns Value-at-Risk (VaR) and the state of financial markets cycle. The econometric analysis is based on a simple vector autoregression setup. Using quarterly data from 1970Q4 to 2008Q4 for France, Germany and the United-Kingdom, it turns out that the k-year VaR of equities is actually dependent on the cycle phase: the expected losses as measured by the VaR are smaller in recession times than expansion periods, whatever the country and the horizon. These results strongly suggest that the European rules regarding the solvency capital requirements for insurance companies should adapt to the state of the financial market’s cycle.


Frédérique Bec et Christian Gollier, « Cyclicality and Term Structure of Value-at-Risk in Europe », IDEI Working Paper, n° 587, mai 2009.

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IDEI Working Paper, n° 587, mai 2009