Systemic Risk: The Empirical Study of the Romanian Market

The recently passed market collapse showed that the careful protection against systematic risk is not enough that is why the new concept of systemic risk was widely researched and developed. G10 report defined systemic risk as a risk of an asset to lose its economic value. Adrian and Brunnermeier (2009) developed original method to measure this systematic risk. This method calculates systematic risk with CoVar variable. Prefix "co" comes from these original words: co-movement, contagion, or contributing. The difference between CoVaR conditional within "distress" period compared with CoVaR within "normal" period is Delta CoVaR. Delta CoVaR is exactly that systemic risk which is able to affect almost all market participations. Empirical study was designed to measure systemic risk for Romanian market. Based on extremely rigorous condition author selected 18 public companies which were analysed. Found results represented the overall situation registered on Romanian market. The total systemic risk was registered on extremely high level 25.52%. The local market did not have similar advanced studies in this area that is why obtained results are really important for market participations, portfolio managers (who plan to include Romanian stocks in their portfolio), and any other individuals or institutions connected with Romanian capital market.