Quantifying extreme risks in stock markets: A case of former Yugoslavian states
One of the reasons why investors were not prepared for heavy losses in the stock markets that occurred after the beginning of sub prime mortgage crisis in the US lies in the curious fact that many practitioners were led to believe that there are so many independent agents participating in the stock...
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| Format: | Article |
| Language: | deu |
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Faculty of Economics University of Rijeka
2008-06-01
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| Series: | Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu |
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| Online Access: | http://www.efri.hr/sites/efri.hr/files/cr-collections/2/zikovic.pdf |
| _version_ | 1818778077953523712 |
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| author | Saša Žiković |
| author_facet | Saša Žiković |
| author_sort | Saša Žiković |
| collection | DOAJ |
| description | One of the reasons why investors were not prepared for heavy losses in the stock markets that occurred after the beginning of sub prime mortgage crisis in the US lies in the curious fact that many practitioners were led to believe that there are so many independent agents participating in the stock markets that surely they must act according to Central limit theorem i.e. according to Gaussian distribution. As it turns out the paradigm of normality has let us down once again and reputation of VaR based risk measurement is seriously damaged. An alternative measure that looks very strong at these dire times and quantifi es the losses that might be encountered in the tail is the conditional VaR (CVaR). While VaR represents a loss one expects at a determined confi dence level for a given holding period, CVaR is the loss one expects, provided that the loss is equal to or greater than VaR. In this paper the testing of CVaR models is performed on stock indexes from Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro and Macedonia. Error statistics show that CVaR models are quite successful at capturing extreme losses that occurred in these markets, especially models based on Generalized extreme value distribution and a proposed Hybrid historical simulation CVaR model. |
| first_indexed | 2024-12-18T11:39:00Z |
| format | Article |
| id | doaj.art-f90163b1ac1e4126b3f8c4a54a59f79d |
| institution | Directory Open Access Journal |
| issn | 1331-8004 |
| language | deu |
| last_indexed | 2024-12-18T11:39:00Z |
| publishDate | 2008-06-01 |
| publisher | Faculty of Economics University of Rijeka |
| record_format | Article |
| series | Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu |
| spelling | doaj.art-f90163b1ac1e4126b3f8c4a54a59f79d2022-12-21T21:09:28ZdeuFaculty of Economics University of RijekaZbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu1331-80042008-06-012614168Quantifying extreme risks in stock markets: A case of former Yugoslavian statesSaša ŽikovićOne of the reasons why investors were not prepared for heavy losses in the stock markets that occurred after the beginning of sub prime mortgage crisis in the US lies in the curious fact that many practitioners were led to believe that there are so many independent agents participating in the stock markets that surely they must act according to Central limit theorem i.e. according to Gaussian distribution. As it turns out the paradigm of normality has let us down once again and reputation of VaR based risk measurement is seriously damaged. An alternative measure that looks very strong at these dire times and quantifi es the losses that might be encountered in the tail is the conditional VaR (CVaR). While VaR represents a loss one expects at a determined confi dence level for a given holding period, CVaR is the loss one expects, provided that the loss is equal to or greater than VaR. In this paper the testing of CVaR models is performed on stock indexes from Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro and Macedonia. Error statistics show that CVaR models are quite successful at capturing extreme losses that occurred in these markets, especially models based on Generalized extreme value distribution and a proposed Hybrid historical simulation CVaR model.www.efri.hr/sites/efri.hr/files/cr-collections/2/zikovic.pdfExtreme lossesConditional VaRExtreme value theoryHybrid historical simulation |
| spellingShingle | Saša Žiković Quantifying extreme risks in stock markets: A case of former Yugoslavian states Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu Extreme losses Conditional VaR Extreme value theory Hybrid historical simulation |
| title | Quantifying extreme risks in stock markets: A case of former Yugoslavian states |
| title_full | Quantifying extreme risks in stock markets: A case of former Yugoslavian states |
| title_fullStr | Quantifying extreme risks in stock markets: A case of former Yugoslavian states |
| title_full_unstemmed | Quantifying extreme risks in stock markets: A case of former Yugoslavian states |
| title_short | Quantifying extreme risks in stock markets: A case of former Yugoslavian states |
| title_sort | quantifying extreme risks in stock markets a case of former yugoslavian states |
| topic | Extreme losses Conditional VaR Extreme value theory Hybrid historical simulation |
| url | http://www.efri.hr/sites/efri.hr/files/cr-collections/2/zikovic.pdf |
| work_keys_str_mv | AT sasazikovic quantifyingextremerisksinstockmarketsacaseofformeryugoslavianstates |