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Article: Empirical analysis of GARCH models in value at risk estimation
Title | Empirical analysis of GARCH models in value at risk estimation |
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Authors | |
Keywords | GARCH model Long memory Market risk |
Issue Date | 2006 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/intfin |
Citation | Journal Of International Financial Markets, Institutions And Money, 2006, v. 16 n. 2, p. 180-197 How to Cite? |
Abstract | This paper studies seven GARCH models, including RiskMetrics and two long memory GARCH models, in Value at Risk (VaR) estimation. Both long and short positions of investment were considered. The seven models were applied to 12 market indices and four foreign exchange rates to assess each model in estimating VaR at various confidence levels. The results indicate that both stationary and fractionally integrated GARCH models outperform RiskMetrics in estimating 1% VaR. Although most return series show fat-tailed distribution and satisfy the long memory property, it is more important to consider a model with fat-tailed error in estimating VaR. Asymmetric behavior is also discovered in the stock market data that t-error models give better 1% VaR estimates than normal-error models in long position, but not in short position. No such asymmetry is observed in the exchange rate data. © 2005 Elsevier B.V. All rights reserved. |
Persistent Identifier | http://hdl.handle.net/10722/82869 |
ISSN | 2023 Impact Factor: 5.4 2023 SCImago Journal Rankings: 1.216 |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | So, MKP | en_HK |
dc.contributor.author | Yu, PLH | en_HK |
dc.date.accessioned | 2010-09-06T08:34:20Z | - |
dc.date.available | 2010-09-06T08:34:20Z | - |
dc.date.issued | 2006 | en_HK |
dc.identifier.citation | Journal Of International Financial Markets, Institutions And Money, 2006, v. 16 n. 2, p. 180-197 | en_HK |
dc.identifier.issn | 1042-4431 | en_HK |
dc.identifier.uri | http://hdl.handle.net/10722/82869 | - |
dc.description.abstract | This paper studies seven GARCH models, including RiskMetrics and two long memory GARCH models, in Value at Risk (VaR) estimation. Both long and short positions of investment were considered. The seven models were applied to 12 market indices and four foreign exchange rates to assess each model in estimating VaR at various confidence levels. The results indicate that both stationary and fractionally integrated GARCH models outperform RiskMetrics in estimating 1% VaR. Although most return series show fat-tailed distribution and satisfy the long memory property, it is more important to consider a model with fat-tailed error in estimating VaR. Asymmetric behavior is also discovered in the stock market data that t-error models give better 1% VaR estimates than normal-error models in long position, but not in short position. No such asymmetry is observed in the exchange rate data. © 2005 Elsevier B.V. All rights reserved. | en_HK |
dc.language | eng | en_HK |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/intfin | en_HK |
dc.relation.ispartof | Journal of International Financial Markets, Institutions and Money | en_HK |
dc.rights | Journal of International Financial Markets, Institutions & Money. Copyright © Elsevier BV. | en_HK |
dc.subject | GARCH model | en_HK |
dc.subject | Long memory | en_HK |
dc.subject | Market risk | en_HK |
dc.title | Empirical analysis of GARCH models in value at risk estimation | en_HK |
dc.type | Article | en_HK |
dc.identifier.openurl | http://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1042-4431&volume=16&issue=2&spage=180&epage=197&date=2006&atitle=Empirical+analysis+of+GARCH+models+in+Value+at+Risk+estimation | en_HK |
dc.identifier.email | Yu, PLH: plhyu@hkucc.hku.hk | en_HK |
dc.identifier.authority | Yu, PLH=rp00835 | en_HK |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/j.intfin.2005.02.001 | en_HK |
dc.identifier.scopus | eid_2-s2.0-33644795306 | en_HK |
dc.identifier.hkuros | 133498 | en_HK |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-33644795306&selection=ref&src=s&origin=recordpage | en_HK |
dc.identifier.volume | 16 | en_HK |
dc.identifier.issue | 2 | en_HK |
dc.identifier.spage | 180 | en_HK |
dc.identifier.epage | 197 | en_HK |
dc.publisher.place | Netherlands | en_HK |
dc.identifier.scopusauthorid | So, MKP=7004473851 | en_HK |
dc.identifier.scopusauthorid | Yu, PLH=7403599794 | en_HK |
dc.identifier.citeulike | 9605963 | - |
dc.identifier.issnl | 1042-4431 | - |