Extreme Returns in the European financial crisis

We examine the transmission of financial shocks among the euro†periphery (Portugal, Ireland, Italy, Greece, Spain), the euro†core (Germany, France, the Netherlands, Finland, Belgium), and the major European Union (but not euro) countries (Sweden, the United Kingdom, Poland, the Czech Republic, Denmark). Using extreme returns on daily stock market data from 2004 until 2013, we find transmission effects for the tails of the returns distributions for the pre†crisis, US crisis and euro crisis periods from the euro†periphery to the non†euro and euro†core groups. During the crises, the shocks transmitted were more substantial, indicating significantly higher losses on extreme return days.