ASSESSING MARKET RISK DURING FINANCIAL CRISES - AN APPLICABLE METHOD OF USING VALUE AT RISK AND EXPECTED SHORTFALL IN INVESTMENTS

Cosmin-Alin Botoroga, Alexandra Horobet and Lucian Belascu
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Cosmin-Alin Botoroga: Bucharest University of Economic Studies, Romania
Alexandra Horobet: Bucharest University of Economic Studies, Romania
Lucian Belascu: Lucian Blaga University of Sibiu, Romania

Revista Economica, 2021, vol. 73, issue 3, 51-74

Abstract: Amid financial crises, the risk of losing money from the investing activity is higher due to the volatility of the market, and unpredictable movements of the prices. Thus, methods for risk measurement such as Value at risk and expected shortfall, help investors and fund managers to prepare for the potential losses and hedge accordingly. This paper summarizes the last three major crises (dot com bubble, the housing market bubble, and healthcare crisis) in an attempt to decide which of them induced the highest market risk, by applying Value at risk and expected shortfall methods to S&P 500 index. Knowing the past and learning from how the stock market moved during these crises help the investors to prepare for future crises.

Keywords: VaR; ES; market risk; student t distribution; GARCH (search for similar items in EconPapers)
JEL-codes: G17 (search for similar items in EconPapers)
Date: 2021
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