Heavy-tailed value-at-risk analysis for Malaysian stock exchange

CHIN, W (2008) Heavy-tailed value-at-risk analysis for Malaysian stock exchange. Physica A: Statistical Mechanics and its Applications, 387 (16-17). pp. 4285-4298. ISSN 03784371

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Official URL: http://dx.doi.org/10.1016/j.physa.2008.01.075

Abstract

This article investigates the comparison of power-law value-at-risk (VaR) evaluation with quantile and non-linear time-varying volatility approaches. A simple Pareto distribution is proposed to account the heavy-tailed property in the empirical distribution of returns. Alternative VaR measurement such as non-parametric quantile estimate is implemented using interpolation method. In addition, we also used the well-known two components ARCH modelling technique under the assumptions of normality and heavy-tailed (student-t distribution) for the innovations. Our results evidenced that the predicted VaR under the Pareto distribution exhibited similar results with the symmetric heavy-tailed long-memory ARCH model. However, it is found that only the Pareto distribution is able to provide a convenient framework for asymmetric properties in both the lower and upper tails. (c) 2008 Elsevier B.V. All rights reserved.

Item Type: Article
Subjects: T Technology > T Technology (General)
Q Science > QA Mathematics > QA75.5-76.95 Electronic computers. Computer science
Divisions: Faculty of Engineering and Technology (FET)
Depositing User: Ms Suzilawati Abu Samah
Date Deposited: 08 Sep 2011 03:15
Last Modified: 08 Sep 2011 03:15
URI: http://shdl.mmu.edu.my/id/eprint/2656

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