Bubbles and the Pro-Cyclicality of Systemic Risk Measures in Shadow Banking

We examine whether speculative bubbles in shadow banking institutions contribute to the buildup and materialization of systemic risk. Using the Phillips–Shi–Yu (BSADF) bubble detection methodology and market-based systemic risk measures (ΔCoVaR and Marginal Expected Shortfall), we analyze daily data for 17 publicly listed U.S. shadow banking firms over the period 2010–2026. We document a pronounced pro-cyclical measurement puzzle. During bubble periods, firms exhibit higher market exposure and g