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Fat-tailed Distributions, Value at Risk and the Japanese Stock Market Returns

Author

Listed:
  • Kengo Kayaba
  • Yohei Sato
  • Junji Sawada
  • Naoki Ueda

Abstract

The Japanese economy has been the second largest economy over the world for a long time before the Chinese economy emerged. The Tokyo Stock Exchange (TSE) is the fourth largest stock exchange in the world by aggregate market capitalization of its listed companies and largest in East Asia and Asia. It is of great importance for those in charge of managing risk to understand how its market index returns are distributed. The goal of this paper is to examine how various types of heavy-tailed distribution perform in risk management of the N225 Index returns. We compared these heavy-tailed distributions through a variety of criteria. Our results indicate the generalized hyperbolic distribution has the best goodness of fit and generates most suitable risk measures.

Suggested Citation

  • Kengo Kayaba & Yohei Sato & Junji Sawada & Naoki Ueda, 2017. "Fat-tailed Distributions, Value at Risk and the Japanese Stock Market Returns," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(11), pages 433-440, November.
    • Handle: RePEc:hur:ijarbs:v:7:y:2017:i:11:p:433-440
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