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Worldwide equity risk prediction

David Ardia & Lennart Hoogerheide

Résumé 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).
   
Mots-clés GARCH, value-at-risk, equity, worldwide, false discovery rate
   
Citation Ardia, D., & Hoogerheide, L. (2014). Worldwide equity risk prediction. Applied Economics Letters, 20(14), 1333-1339.
   
Type Article de périodique (Anglais)
Date de publication 2014
Nom du périodique Applied Economics Letters
Volume 20
Numéro 14
Pages 1333-1339
URL http://www.tandfonline.com/doi/pdf/10.1080/13504851.2013....