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Risks of Turkish Industries During Financial Crisis

Author

Listed:
  • Harun SENCAL

    (Fatih Universitesi)

  • Mehmet ORHAN

    (Fatih Universitesi)

Abstract

In this study, we analyze the risk aspects of subsectors in Turkey before and after the global financial crisis based on ISE indices of industries. First, we report the descriptive statistics of 19 subsectors. Then, we make use of GARCH (1,1) specification to estimate the volatility of the indices changing over time. We use the Kupiec and Christoffersen Tests to evaluate the success of VaR estimation. We split the duration of the analysis into two subperiods for more elaborate analysis: 2004 (April) - 2007 (July) and 2007(August)-2013(March). Our findings suggest that although VaR based on GARCH (1, 1) model seems a reliable model at 99% confidence level, it is relatively less reliable in terms of predicting the correct number of extreme losses at 90% and 95% confidence levels. Furthermore, this study shows that the global financial crisis affected the performance of VaR based on GARCH (1, 1) model at all confidence levels.

Suggested Citation

  • Harun SENCAL & Mehmet ORHAN, 2014. "Risks of Turkish Industries During Financial Crisis," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 29(343), pages 83-104.
    • Handle: RePEc:iif:iifjrn:v:29:y:2014:i:343:p:83-104
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    More about this item

    Keywords

    Value-at-Risk; Global Financial Crisis; GARCH; Borsa Istanbul; Kupiec Test; Christoffersen Test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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