AI-sector episodes weigh most on UK financial return asymmetry
AI-sector scenarios make the largest contribution to downside asymmetry in UK financial returns, but little in Canada. A Bank of Canada staff paper published October 16, 2026, finds financial-sector-specific scenarios dominate extreme returns across five markets.
Five markets, different tail exposures
Javier Ojea-Ferreiro, Andrea Ugolini and Juan C. Reboredo find financial-sector-specific scenarios dominate both return tails in all five markets.
In the United Kingdom, AI-sector scenarios account for 22.6 percent of downside expected shortfall versus 15.9 percent on the upside.
Their skewness contribution is -0.052, the largest negative contribution there, versus -0.026 in Europe, -0.035 in China and -0.001 in Canada.
In the United States, AI-sector scenarios have the smallest weight, approximately 7 percent of each tail.
China alone has positive average skewness, at 0.021, driven by financial and systemic scenarios rather than AI-sector outcomes.
Financial and systemic scenarios dominate downside asymmetry in Canada and the United States.
Four scenarios separate concurrent exposures
Daily local-currency equity returns span December 9, 2021, to December 2025.
The authors proxy AI exposure with the WisdomTree Artificial Intelligence and Innovation Fund and construct real-economy indices excluding financial and AI firms.
They decompose expected shortfall and a tail-sensitive skewness index into financial-only, AI-sector, macroeconomic and joint systemic scenarios.
Results cover the lowest and highest 5 percent of conditional returns.
The framework starts with financial extremes and identifies concurrent market conditions.
Association is not causation
The authors present the framework as a market-based complement to reverse stress testing.
It measures perceived AI exposure, not firms' adoption or operational incidents, and does not establish causality.
They conclude that AI-related vulnerabilities require assessment alongside macroeconomic conditions.
Source: Artificial Intelligence and Financial Tail Risks
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