Abstract:
This paper uses the average of the percentile ranking of three measures of systemic risk { Granger Causality, Marginal Expected Shortfall,and Conditional Value at Risk { to calculate a single systemic risk index (SRI) for a firm. The SRI is used to identify systemically important firms (SIFs) among the 50 largest firms in a quarter. This has the advantage of identifying SIFs on a regular basis using readily available data. The paper uses this approach to identify SIFs by SRI each quarter from 2000 to 2012, and finds that the cumulative risk of the SIFs tracks the changes in systemic risk in India during the
2008 crisis. The paper also finds merit in monitoring non-financial firms by their SRI, particularly when bank loan portfolios have concentrated exposures in these firms.
