Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH
1
John von Neumann Institute, Vietnam National University, Ho Chi Minh City, Vietnam
2
Queen’s Management School, Queen’s University Belfast, Belfast BT7 1NN, UK
3
Faculty of Business and Economics, Technische Universität Dresden, 01062 Dresden, Germany
4
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; https://doi.org/10.3390/jrfm11020018
Received: 16 March 2018 / Revised: 3 April 2018 / Accepted: 3 April 2018 / Published: 5 April 2018
(This article belongs to the Special Issue Trends in Emerging Markets Finance, Institutions and Money)
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.
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Keywords:
ASEAN; GARCH; stochastic volatility; Value-at-Risk
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MDPI and ACS Style
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. https://doi.org/10.3390/jrfm11020018
AMA Style
Bui Quang P, Klein T, Nguyen NH, Walther T. Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH. Journal of Risk and Financial Management. 2018; 11(2):18. https://doi.org/10.3390/jrfm11020018
Chicago/Turabian StyleBui Quang, Paul; Klein, Tony; Nguyen, Nam H.; Walther, Thomas. 2018. "Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH" J. Risk Financial Manag. 11, no. 2: 18. https://doi.org/10.3390/jrfm11020018
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