IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v22y2012i9p723-732.html
   My bibliography  Save this article

An analysis of the extreme returns distribution: the case of the Istanbul Stock Exchange

Author

Listed:
  • A. Goncu
  • A. Karaman Akgul
  • O. Imamoğlu
  • M. Tiryakioğlu
  • M. Tiryakioğlu

Abstract

The assumption of normality of asset returns is widely used in financial modelling, financial regulation on risks and capital and Value-at-Risk (VaR) modelling. As observed during times of stock market crashes or financial stress, extreme returns cannot be adequately modelled using the Gaussian distribution. In this study, we use the Extreme Value Theory (EVT) to model the extreme return behaviour of the Istanbul Stock Exchange (ISE), Turkey. Three different distributions are used, namely Gumbel, Fr�chet and Weibull, for modelling extreme returns over different investment horizons. The goodness-of-fit for these distributions is verified by the Anderson--Darling goodness-of-fit test. VaR is computed with the proposed distributions and backtesting results indicate that the EVT provides superior risk management in all the sub-intervals considered compared to the VaR estimation under the assumption of a normal distribution.

Suggested Citation

  • A. Goncu & A. Karaman Akgul & O. Imamoğlu & M. Tiryakioğlu & M. Tiryakioğlu, 2012. "An analysis of the extreme returns distribution: the case of the Istanbul Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 22(9), pages 723-732, May.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:9:p:723-732
    DOI: 10.1080/09603107.2011.624081
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09603107.2011.624081
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603107.2011.624081?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. Tim Keighley & Thomas Longden & Supriya Mathew & Stefan Trück, 2014. "Quantifying Catastrophic and Climate Impacted Hazards Based on Local Expert Opinions," Working Papers 2014.93, Fondazione Eni Enrico Mattei.

    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:22:y:2012:i:9:p:723-732. 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.