Worldwide Equity Risk Prediction
Laval University - Département de Finance et Assurance; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)
Lennart F. Hoogerheide
Vrije Universiteit Amsterdam - Dept. of Econometrics
May 23, 2012
Applied Economics Letters, Forthcoming
Various GARCH models are applied to daily returns of more than 1200 constituents of major stock indices worldwide. The value-at-risk forecast performance is investigated for different markets and industries, considering the test for correct conditional coverage using the false discovery rate (FDR) methodology. For most of the markets and industries we find the same two conclusions. First, an asymmetric GARCH specification is essential when forecasting the 95% value-at-risk. Second, for both the 95% and 99% value-at-risk it is crucial that the innovations’ distribution is fat-tailed (e.g., Student-t or – even better – a non-parametric kernel density estimate).
Number of Pages in PDF File: 9
Keywords: GARCH, value-at-risk, equity, worldwide, false discovery rate
JEL Classification: C11, C22, C52working papers series
Date posted: May 23, 2012 ; Last revised: May 22, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.609 seconds