Unravelling Systemic Risk Dynamics amid Financial Asset Bubbles in Times of Enhanced Volatilit

This study investigates the dynamics of systemic risk during episodes characterised by asset price bubbles.Specifically, it examines the presence of financial bubbles across all companies included in the Romanian BET Index and isolates these occurrences for further analysis.During the identified bubble periods, a comprehensive suite of systemic risk metrics is applied to assess patterns and fluctuations in systemic risk.This methodological framework enhances our understanding of market and systemic risk dynamics in periods marked by the existence of bubbles.The findings demonstrate a persistent relationship between highly volatile bubble episodes and elevated systemic risk within the Romanian market.This correlation remains consistent across various systemic risk measures and proves robust when accounting for factors such as company age, size, and market presence.Notably, the study reveals that significant increases in systemic risk are not confined to the bursting phase of asset bubbles, but are observable across all stages of the bubble lifecycle.These insights are particularly relevant for the development of macroprudential policies aimed at mitigating the adverse impacts of financial bubbles on overall market stability.