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 companiesin the European stock market on a geographical basis. We use the EuroStoxx 50Index as a proxy for the financial system and we rely on the CoVaR and Delta-CoVaR riskmeasures to estimate the contribution of each European country belonging to the index tosystemic risk. We also conduct the significance and dominance test to evaluate whetherthe systemic relevance of considered countries is statistically significant and to determinewhich nation exerts the greatest influence on the spreading of negative spillover effects onthe entire economy. Our empirical results show that, for the period ranging from 2008 to2017, all countries contribute significantly to systemic risk, especially in times of crisis andhigh volatility in the markets. Moreover, it emerges that France is the systemically riskiestcountry, followed by Germany, Italy, Spain and Netherlands.