Desmarais Global Finance Research Centre (DGFRC) Seminar: Torben Andersen
Torben Andersen
Northwestern University
The Granular Origin of Tail Dispersion Risk
Date: Friday, November 7, 2025
Time: 10:30-11:45 am
Location: Bronfman Bldg. (1001 Sherbrooke St. West), Room 245
All are cordially invited to attend.
Abstract:
We study the asset pricing implications of temporal shifts in the investment opportunities set characterized by changes in the shape of the tails of the cross-sectional return distribution. The risk associated with this form of tail shape shift depends on its origin, namely whether or not the returns are exposed to a systematic event: in the former case it stems from tail risk in the assets’ exposure to systematic risk, while in the latter case it arises from idiosyncratic jump tail risk in the individual asset returns themselves. We show empirically that shocks to the cross-sectional tail shape are a source of priced risk: fat idiosyncratic tails are favored by investors, while fat-tailed exposures to systematic jumps are disliked.
