Asymmetric Dependence in US Financial Risk Factors?

When assets exhibit asymmetric dependence or joint downside risk, diversificationcan fail and financial markets may be prone to systemic risk. We analyze thedependence structure of risk factors in the US economy, using both correlations anda parsimonious set of copulas. We find evidence of downside risk in several risk factors.Interestingly for research on systemic risk, the pairs with downside risk includeconsumption with the Dow Jones, as well as consumption with market and size factors.Of these pairs, only the size factor exhibits an offsetting upside comovement withconsumption during good periods...