EXPLORING STOCK MARKET RISK USING A GENERALIZED BREACH INDICATOR: EVIDENCE FROM INTERNATIONAL FINANCIAL MARKETS

Samuel Tabot Enow ()
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Samuel Tabot Enow: IIE Varsity College, South Africa

Eurasian Journal of Economics and Finance, 2024, vol. 12, issue 1, 45-51

Abstract: Stock market risk is of significant consideration in asset management, due to its direct link with valuation. Risk in stock markets mostly arises from macro and micro policies which influence the returns of an index. However, there is no real meaningful study that has estimated the extent to which the realized returns exceed or fall short of the expected return in international stock markets. The aim of this study was to explore market risk using breach indicators in the JSE, Nasdaq, CAC 40, DAX, Nikkei 224, and BIST100 indexes. Using a sample period from January 2, 2018, to January 2, 2023, the findings revealed a significantly lower breach of expected returns in the Nasdaq, DAX, and CAC 40 while the JSE was within range. This implies a significantly larger than normal uncompensated risk involved in the Nasdaq, DAX, and CAC 40. However, the Nikkei 225 and BIST100 displayed a significant positive breach of expected returns. The findings of this study strengthen the debate that stock markets in developed countries are more susceptible to risk and losses than stock markets in less developed countries. In essence, using long-term moving averages will be useful in mitigating absurd price swings in the Nasdaq, DAX, and CAC 40.

Keywords: Stock Markets; Risk; Generalized Breach Indicators; Value-at Risk; Heteroscedasticity; Total Loss (search for similar items in EconPapers)
Date: 2024
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