Cross‑Country assessment of systemic risk in the European Stock Market: evidence from a CoVaR analysis
This work is intended to assess the contribution to systemic risk of major companies
in the European stock market on a geographical basis. We use the EuroStoxx 50
Index as a proxy for the financial system and we rely on the CoVaR and Delta-CoVaR risk
measures to estimate the contribution of each European country belonging to the index to
systemic risk. We also conduct the significance and dominance test to evaluate whether
the systemic relevance of considered countries is statistically significant and to determine
which nation exerts the greatest influence on the spreading of negative spillover effects on
the entire economy. Our empirical results show that, for the period ranging from 2008 to
2017, all countries contribute significantly to systemic risk, especially in times of crisis and
high volatility in the markets. Moreover, it emerges that France is the systemically riskiest
country, followed by Germany, Italy, Spain and Netherlands.