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Market risk of developed and developing countries during the global financial crisis

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  • Köksal, Bülent
  • Orhan, Mehmet

Abstract

This study compares the performance of the widely used risk measure Value-at-Risk (VaR) across a large sample of developed and developing countries. The performance of the VaR is assessed by both unconditional and conditional tests of Kupiec and Christoffersen, respectively, as well as the Quadratic Loss Function. Results indicate that the performance of VaR as a measure of risk is much worse for developed countries than the developing ones during our sample period. One possible reason might be the deeper initial impact of global financial crisis on developed countries than emerging markets. Results also provide evidence of decoupling between emerging and developed countries in terms of market risk during the global financial crisis.

Suggested Citation

  • Köksal, Bülent & Orhan, Mehmet, 2012. "Market risk of developed and developing countries during the global financial crisis," MPRA Paper 37523, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37523
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    File URL: https://mpra.ub.uni-muenchen.de/37523/1/MPRA_paper_37523.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Value-at-Risk (VaR); Developed Countries; Emerging Markets; ARCH/GARCH Estimation; Kupiec Test; Christoffersen Test; Quadratic Loss Function;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G01 - Financial Economics - - General - - - Financial Crises

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