IDEAS home Printed from https://ideas.repec.org/a/blg/reveco/v73y2021i3p51-74.html
   My bibliography  Save this article

Assessing Market Risk During Financial Crises - An Applicable Method Of Using Value At Risk And Expected Shortfall In Investments

Author

Listed:
  • BOTOROGA Cosmin-Alin

    (Bucharest University of Economic Studies, Romania)

  • HOROBET Alexandra

    (Bucharest University of Economic Studies, Romania)

  • BELASCU Lucian

    (Lucian Blaga University of Sibiu, Romania)

Abstract

Amid financial crises, the risk of losing money from the investing activity is higher due to the volatility of the market, and unpredictable movements of the prices. Thus, methods for risk measurement such as Value at risk and expected shortfall, help investors and fund managers to prepare for the potential losses and hedge accordingly. This paper summarizes the last three major crises (dot com bubble, the housing market bubble, and healthcare crisis) in an attempt to decide which of them induced the highest market risk, by applying Value at risk and expected shortfall methods to S&P 500 index. Knowing the past and learning from how the stock market moved during these crises help the investors to prepare for future crises.

Suggested Citation

  • BOTOROGA Cosmin-Alin & HOROBET Alexandra & BELASCU Lucian, 2021. "Assessing Market Risk During Financial Crises - An Applicable Method Of Using Value At Risk And Expected Shortfall In Investments," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 73(3), pages 51-74, October.
    • Handle: RePEc:blg:reveco:v:73:y:2021:i:3:p:51-74
    as

    Download full text from publisher

    File URL: http://economice.ulbsibiu.ro/revista.economica/archive/73302botoroga&horobet&belascu.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lu, Xinjie & Ma, Feng & Wang, Jiqian & Zhu, Bo, 2021. "Oil shocks and stock market volatility: New evidence," Energy Economics, Elsevier, vol. 103(C).
    2. Brooks, Chris & Burke, Simon P. & Persand, Gita, 2001. "Benchmarks and the accuracy of GARCH model estimation," International Journal of Forecasting, Elsevier, vol. 17(1), pages 45-56.
    3. Izzeldin, Marwan & Muradoğlu, Yaz Gülnur & Pappas, Vasileios & Sivaprasad, Sheeja, 2021. "The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model," International Review of Financial Analysis, Elsevier, vol. 74(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ma, Feng & Lu, Xinjie & Liu, Jia & Huang, Dengshi, 2022. "Macroeconomic attention and stock market return predictability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    2. Liu, Shan & Li, Ziwei, 2023. "Macroeconomic attention and oil futures volatility prediction," Finance Research Letters, Elsevier, vol. 57(C).
    3. Greta Keliuotyte-Staniuleniene & Julius Kviklis, 2021. "Assessing the reaction of the Baltic stock market to the spread of the COVID-19 pandemic," Technium Social Sciences Journal, Technium Science, vol. 25(1), pages 260-272, November.
    4. Song, Huiling & Wang, Chang & Lei, Xiaojie & Zhang, Hongwei, 2022. "Dynamic dependence between main-byproduct metals and the role of clean energy market," Energy Economics, Elsevier, vol. 108(C).
    5. Gita Persand & Chris Brooks & Simon P. Burke, 2003. "Multivariate GARCH models: software choice and estimation issues," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(6), pages 725-734.
    6. Li, Dengjia & Ma, Chaoqun & Yang, Jinglan & Li, Hao, 2024. "ESG performance and corporate fraud," Finance Research Letters, Elsevier, vol. 62(PB).
    7. Doyle, John R. & Chen, Catherine Huirong, 2012. "A multidimensional classification of market anomalies: Evidence from 76 price indices," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(5), pages 1237-1257.
    8. Wang, Jiqian & Ma, Feng & Bouri, Elie & Zhong, Juandan, 2022. "Volatility of clean energy and natural gas, uncertainty indices, and global economic conditions," Energy Economics, Elsevier, vol. 108(C).
    9. Liu, Guangqiang & Guo, Xiaozhu, 2022. "Forecasting stock market volatility using commodity futures volatility information," Resources Policy, Elsevier, vol. 75(C).
    10. Xu, Jiaqi & Zhao, Jingfeng & Liu, Wen, 2023. "A comparative study of renewable and fossil fuels energy impacts on green development in Asian countries with divergent income inequality," Resources Policy, Elsevier, vol. 85(PA).
    11. Wei, Xiaoyun & Han, Liyan, 2021. "The impact of COVID-19 pandemic on transmission of monetary policy to financial markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    12. Emre BULUT & Ahmed İhsan ŞİMŞEK, 2023. "The Relationship Between the Stock Market Volatility, Liquidity, Exchange Rate Return, and Stock Return During the COVID-19 Period: The case of the BIST 100 Index," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 7(1), pages 121-135, June.
    13. Paolella, Marc S. & Polak, Paweł, 2015. "ALRIGHT: Asymmetric LaRge-scale (I)GARCH with Hetero-Tails," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 282-297.
    14. Chalabi, Yohan / Y. & Wuertz, Diethelm, 2010. "Weighted trimmed likelihood estimator for GARCH models," MPRA Paper 26536, University Library of Munich, Germany.
    15. A. Yalta & A. Yalta, 2010. "Should Economists Use Open Source Software for Doing Research?," Computational Economics, Springer;Society for Computational Economics, vol. 35(4), pages 371-394, April.
    16. Andrew Gordon Wilson & David A. Knowles & Zoubin Ghahramani, 2011. "Gaussian Process Regression Networks," Papers 1110.4411, arXiv.org.
    17. Thorbecke, Willem, 2022. "Understanding the transmission of COVID-19 news to French financial markets in early 2020," International Economics, Elsevier, vol. 170(C), pages 103-114.
    18. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    19. Afees A. Salisu & Rangan Gupta & Oguzhan Cepni & Petre Caraiani, 2024. "Oil shocks and state-level stock market volatility of the United States: a GARCH-MIDAS approach," Review of Quantitative Finance and Accounting, Springer, vol. 63(4), pages 1473-1510, November.
    20. Gu, Tiantian & Venkateswaran, Anand & Erath, Marc, 2023. "Impact of fiscal stimulus on volatility: A cross-country analysis," Research in International Business and Finance, Elsevier, vol. 65(C).

    More about this item

    Keywords

    VaR; ES; market risk; student t distribution; GARCH;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:blg:reveco:v:73:y:2021:i:3:p:51-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Eduard Alexandru Stoica (email available below). General contact details of provider: https://edirc.repec.org/data/feulbro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.