摘要：This paper examines the link between risk and institutional quality, an unresolved issue in finance. Our hypothesis is
that institutions affect risk through extreme events and less through volatility. We focus on relative tail risk with an
original approach that is able to estimate historical tail risk with greater precision. Using international stock market
data, we show that tail risk is stable over time, unlike volatility. We find that tail risk captures the relation between risk
and institutional quality better than volatility. Better governance substantially reduces the probability of extreme events.
