We examine the pricing of co-tail risk, or tail risk arising from the co-movement in lower left-tail distribution of stock and market returns, for 43,000 stocks from 46 countries during 1995 and 2013. We decompose global co-tail risk into non-local global, U.S. market-related, and non-U.S. global components and find that all these risks as well as local market-related co-tail risk are independently priced after controlling for stock characteristics. The pricing is stronger in countries with well-developed fund industry, large presence of foreign investors, and less restrictions on capital flows, reflecting large demand for hedging co-tail risks in more open countries.

Keywords: tail risk, left-tail, international stock markets