Multivariate crash risk and worldwide stock returns

This paper examines the pricing of multivariate crash risk (MCRASH), which measures the conditional probability that a stock crashes when one or more systematic risk factors crash. Using data from 48 countries between 1992 and 2021, we show that MCRASH is a robust predictor of expected stock returns. The premium is stronger in emerging markets and concentrated in cyclical industries, consistent with differences in institutional quality, earnings cyclicality, and macroeconomic exposure. We also document that cultural dimensions condition the pricing of MCRASH. Individualism and uncertainty avoidance strengthen the premium, trust dampens it, and power distance intensifies it during high-volatility states. These results highlight the state-dependent role of culture in shaping investor responses to systemic risk.