The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns
This study utilizes the seven bivariate generalized autoregressive conditional heteroskedasticity (GARCH) models to forecast the out-of-sample value-at-risk (VaR) of 21 stock portfolios and seven currency-stock portfolios with three weight combinations, and then employs three accuracy tests and one...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2018-11-01
|
| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/6/4/133 |
| _version_ | 1819243194685063168 |
|---|---|
| author | Jung-Bin Su Jui-Cheng Hung |
| author_facet | Jung-Bin Su Jui-Cheng Hung |
| author_sort | Jung-Bin Su |
| collection | DOAJ |
| description | This study utilizes the seven bivariate generalized autoregressive conditional heteroskedasticity (GARCH) models to forecast the out-of-sample value-at-risk (VaR) of 21 stock portfolios and seven currency-stock portfolios with three weight combinations, and then employs three accuracy tests and one efficiency test to evaluate the VaR forecast performance for the above models. The seven models are constructed by four types of bivariate variance-covariance specifications and two approaches of parameters estimates. The four types of bivariate variance-covariance specifications are the constant conditional correlation (CCC), asymmetric and symmetric dynamic conditional correlation (ADCC and DCC), and the BEKK, whereas the two types of approach include the standard and non-standard approaches. Empirical results show that, regarding the accuracy tests, the VaR forecast performance of stock portfolios varies with the variance-covariance specifications and the approaches of parameters estimate, whereas it does not vary with the weight combinations of portfolios. Conversely, the VaR forecast performance of currency-stock portfolios is almost the same for all models and still does not vary with the weight combinations of portfolios. Regarding the efficiency test via market risk capital, the NS-BEKK model is the most suitable model to be used in the stock and currency-stock portfolios for bank risk managers irrespective of the weight combination of portfolios. |
| first_indexed | 2024-12-23T14:51:50Z |
| format | Article |
| id | doaj.art-07abb8e1304d438aba36d5b929c5445a |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-12-23T14:51:50Z |
| publishDate | 2018-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-07abb8e1304d438aba36d5b929c5445a2022-12-21T17:42:55ZengMDPI AGRisks2227-90912018-11-016413310.3390/risks6040133risks6040133The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ ReturnsJung-Bin Su0Jui-Cheng Hung1Department of Finance, China University of Science and Technology, No. 245, Sec. 3, Academia Rd., Nangang Dist., Taipei 11581, TaiwanDepartment of Banking and Finance, Chinese Culture University, No. 55, Hwa-Kang Rd., Yang-Ming-Shan, Taipei 11114, TaiwanThis study utilizes the seven bivariate generalized autoregressive conditional heteroskedasticity (GARCH) models to forecast the out-of-sample value-at-risk (VaR) of 21 stock portfolios and seven currency-stock portfolios with three weight combinations, and then employs three accuracy tests and one efficiency test to evaluate the VaR forecast performance for the above models. The seven models are constructed by four types of bivariate variance-covariance specifications and two approaches of parameters estimates. The four types of bivariate variance-covariance specifications are the constant conditional correlation (CCC), asymmetric and symmetric dynamic conditional correlation (ADCC and DCC), and the BEKK, whereas the two types of approach include the standard and non-standard approaches. Empirical results show that, regarding the accuracy tests, the VaR forecast performance of stock portfolios varies with the variance-covariance specifications and the approaches of parameters estimate, whereas it does not vary with the weight combinations of portfolios. Conversely, the VaR forecast performance of currency-stock portfolios is almost the same for all models and still does not vary with the weight combinations of portfolios. Regarding the efficiency test via market risk capital, the NS-BEKK model is the most suitable model to be used in the stock and currency-stock portfolios for bank risk managers irrespective of the weight combination of portfolios.https://www.mdpi.com/2227-9091/6/4/133value-at-riskaccuracy testefficiency testconstant conditional correlationdynamic conditional correlationstock market |
| spellingShingle | Jung-Bin Su Jui-Cheng Hung The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns Risks value-at-risk accuracy test efficiency test constant conditional correlation dynamic conditional correlation stock market |
| title | The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns |
| title_full | The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns |
| title_fullStr | The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns |
| title_full_unstemmed | The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns |
| title_short | The Value-At-Risk Estimate of Stock and Currency-Stock Portfolios’ Returns |
| title_sort | value at risk estimate of stock and currency stock portfolios returns |
| topic | value-at-risk accuracy test efficiency test constant conditional correlation dynamic conditional correlation stock market |
| url | https://www.mdpi.com/2227-9091/6/4/133 |
| work_keys_str_mv | AT jungbinsu thevalueatriskestimateofstockandcurrencystockportfoliosreturns AT juichenghung thevalueatriskestimateofstockandcurrencystockportfoliosreturns AT jungbinsu valueatriskestimateofstockandcurrencystockportfoliosreturns AT juichenghung valueatriskestimateofstockandcurrencystockportfoliosreturns |