The Risk of Individual Stocks’ Tail Dependence with the Market and Its Effect on Stock Returns

Figure 2

The existence of tail dependence. To verify the existence of tail dependence, we show the distribution of full-sample (1997–2008) tail dependence by the histogram and the related statistics in (a). At each time , we employ previous two years’ observations to estimate the tail dependences for all stocks and provide the dynamics of their mean, minimum, three quartiles, and maximum from 1999 to 2008 in (b).

(a)

(b)