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Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH

John von Neumann Institute, Vietnam National University, Ho Chi Minh City, Vietnam
Queen’s Management School, Queen’s University Belfast, Belfast BT7 1NN, UK
Faculty of Business and Economics, Technische Universität Dresden, 01062 Dresden, Germany
Institute for Operations Research and Computational Finance, University of St. Gallen, 9000 St. Gallen, Switzerland
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2018, 11(2), 18;
Received: 16 March 2018 / Revised: 3 April 2018 / Accepted: 3 April 2018 / Published: 5 April 2018
(This article belongs to the Collection Trends in Emerging Markets Finance, Institutions and Money)
PDF [446 KB, uploaded 3 May 2018]


This study compares the performance of several methods to calculate the Value-at-Risk of the six main ASEAN stock markets. We use filtered historical simulations, GARCH models, and stochastic volatility models. The out-of-sample performance is analyzed by various backtesting procedures. We find that simpler models fail to produce sufficient Value-at-Risk forecasts, which appears to stem from several econometric properties of the return distributions. With stochastic volatility models, we obtain better Value-at-Risk forecasts compared to GARCH. The quality varies over forecasting horizons and across markets. This indicates that, despite a regional proximity and homogeneity of the markets, index volatilities are driven by different factors. View Full-Text
Keywords: ASEAN; GARCH; stochastic volatility; Value-at-Risk ASEAN; GARCH; stochastic volatility; Value-at-Risk

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Bui Quang, P.; Klein, T.; Nguyen, N.H.; Walther, T. Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH. J. Risk Financial Manag. 2018, 11, 18.

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