We analyze the cross-sectional di erences in the tail risk of equity returns and identify the drivers of tail risk. We provide two statistical procedures to test the hypothesis of cross-sectional downside tail shape homogeneity. An empirical study of 230 US non- nancial rms shows that between 2008 and 2011 the cross-sectional tail shape is homogeneous across equity returns. The heterogeneity in tail risk over this period can be entirely attributed to di erences in scale. The di erences in scales are driven by the following rm characteristics: market beta, size, book-to- market ratio, leverage and bid-ask spread.
Moore, K., Sun, P., de Vries, C., & Zhou, C. (2013). Shape homogeneity and scale heterogeneity of downside tail risk. ESI Working Paper 13-13. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/45