Value-at-Risk and Extreme Returns in Asian Stock Markets
Author | : Andre Carvalhal |
Publisher | : |
Total Pages | : 24 |
Release | : 2009 |
ISBN-10 | : OCLC:1290291671 |
ISBN-13 | : |
Rating | : 4/5 (71 Downloads) |
Download or read book Value-at-Risk and Extreme Returns in Asian Stock Markets written by Andre Carvalhal and published by . This book was released on 2009 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to use the extreme value theory to analyze ten Asian stock markets, identifying which type of extreme value asymptotic distribution better fits historical extreme market events. Understanding the influence of extreme market events is of great importance for risk managers. Our empirical tests indicate that the return distributions are not characterized by normality and that the minima and the maxima of the return series may be satisfactorily modeled within an extreme value framework. The average waiting time for an index to present a daily return below/above a specific threshold is generally larger for Asian major markets than for Asian emerging markets. We also compute VaR estimates using extreme value theory and compare the results with the empirical and normal VaR estimates. The results suggest that the extreme value method of estimating VaR is a more conservative approach to determining capital requirements than traditional methods.