IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v18y2007i3p239-254.html
   My bibliography  Save this article

Extreme returns and the contagion effect between the foreign exchange and the stock market: evidence from Cyprus

Author

Listed:
  • Stelios Bekiros
  • Dimitris Georgoutsos

Abstract

In this article we apply the Extreme Value Theory (EVT) in order to estimate the Value-at-Risk (VaR) and the correlation of extreme returns for two inherently unstable markets; the foreign exchange and the stock market. We also derive the corresponding VaR estimates from more 'traditional' methods of estimation on daily returns of the US dollar/Cyprus pound exchange rate and the Cyprus stock exchange general index. The main conclusion we reach is that the more heavy-tailed distributed a series is the more accurate the loss predictions are from the application of the EVT. We also show that the conditional correlation index of the extreme returns of those two markets remained almost constant throughout the backtesting period that was characterized by 'bear' market conditions.

Suggested Citation

  • Stelios Bekiros & Dimitris Georgoutsos, 2007. "Extreme returns and the contagion effect between the foreign exchange and the stock market: evidence from Cyprus," Applied Financial Economics, Taylor & Francis Journals, vol. 18(3), pages 239-254.
    • Handle: RePEc:taf:apfiec:v:18:y:2007:i:3:p:239-254
    DOI: 10.1080/09603100601018823
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100601018823
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603100601018823?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George Kouretas & Leonidas Zarangas, 2005. "Conditional autoregressive valu at risk by regression quantile: Estimatingmarket risk for major stock markets," Working Papers 0521, University of Crete, Department of Economics.
    2. Marco Rocco, 2011. "Extreme value theory for finance: a survey," Questioni di Economia e Finanza (Occasional Papers) 99, Bank of Italy, Economic Research and International Relations Area.
    3. Roman Matkovskyy, 2019. "Extremal Economic (Inter)Dependence Studies: A Case of the Eastern European Countries," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 667-698, September.
    4. Rahajeng Cahyaning Putri Cipto & Akhsyim Afandi, 2012. "Domestic and foreign factors for stock prices in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 4(2), pages 141-153, April.
    5. Liu, Wei-han, 2016. "A re-examination of maturity effect of energy futures price from the perspective of stochastic volatility," Energy Economics, Elsevier, vol. 56(C), pages 351-362.
    6. Berger, Dave & Turtle, H.J., 2011. "Emerging market crises and US equity market returns," Global Finance Journal, Elsevier, vol. 22(1), pages 32-41.

    More about this item

    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:taf:apfiec:v:18:y:2007:i:3:p:239-254. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    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.