Tail Risk Concerns Everywhere

We show that the beta with respect to an index of global ex ante tail risk concerns (GRIX), which we construct using out-of-the-money options on multiple global assets, negatively drives cross-sectional return variations across asset classes, including international equity indices, foreign currencies, and government bond futures. The pricing power of GRIX becomes stronger when more asset-class-level tail risk concerns are incorporated in the index construction. GRIX also dominates asset-class-level tail risk concerns in pricing assets within each asset class. These evidences imply that the pricing effect of tail risk concerns works predominantly as a global channel. The GRIX pricing effect is distinct from that of tail risk factors based on historical realizations, consistent with the interpretation that tail risk concerns likely reflect investors' ex ante subjective belief about tail risk.