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Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023

Viral V. Acharya et al.

Annual Review of Financial Economics2025https://doi.org/10.1146/annurev-financial-112823-015828article
AJG 3ABDC B
Weight
0.37

Abstract

We assess the efficacy of market-based systemic risk measures that rely on US financial firms’ stock return comovements with market- or sector-wide returns under stress from 1895 to 2023. Stress episodes are identified using corporate bond spread widening and narrative dating, spanning from the Panic of 1907 to the Banking Stress of 2023. Measures observed prior to the onset of stress episodes predict market outcomes (realized volatility and returns), balance sheet outcomes (lending, profitability, and run risk), and bank failures. Specifically, the measures are: ( a ) particularly effective in capturing the cross-sectional ranking of institutions conditional on a stress episode, rather than aggregate outcomes; ( b ) more informative when stress episodes are severe; and ( c ) relevant for both banks and nonbank financial institutions, although measures incorporating market leverage are especially informative for banks. A comparative analysis shows that market-based indicators offer information that is distinct from, and complementary to, traditional balance sheet metrics used in supervisory and macroprudential risk assessment.

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https://doi.org/https://doi.org/10.1146/annurev-financial-112823-015828

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@article{viral2025,
  title        = {{Systemic Risk Measures: From the Panic of 1907 to the Banking Stress of 2023}},
  author       = {Viral V. Acharya et al.},
  journal      = {Annual Review of Financial Economics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1146/annurev-financial-112823-015828},
}

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.