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Risk-management criteria in the Latin-American stock markets: an assessment with a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry

Author

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  • Arturo Lorenzo-Valdés
  • Antonio Ruíz-Porras

Abstract

We build a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry. We use the model for modelling series of stock-market returns and for investigating some risk-management criteria prevailing in the Latin-American stock markets. The main results support the usefulness of the model. Particularly, they suggest that hedging and diversification practices among the markets may be useful for risk-management purposes. Moreover, they suggest that the most risk-averse investors are in Argentina and the least risk-averse ones in Colombia. Furthermore, they imply that the behaviour of investors may be more complex than the one postulated by the mean-variance paradigm.

Suggested Citation

  • Arturo Lorenzo-Valdés & Antonio Ruíz-Porras, 2015. "Risk-management criteria in the Latin-American stock markets: an assessment with a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 5(4), pages 430-450.
    • Handle: RePEc:ids:ijcome:v:5:y:2015:i:4:p:430-450
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