Risk prediction management and weak form market efficiency in Eurozone financial crisis

Marcelo Righi () and Paulo Sergio Ceretta

International Review of Financial Analysis, 2013, vol. 30, issue C, 384-393

Abstract: This paper aims to determine if during the recent European financial crisis European markets are efficient in the weak form, as well to introduce an approach to properly predict daily risk of portfolios composed by these market assets, considering their dependence structure. We use daily data from German, English, French, Greek, Dutch and Belgian markets. We perform variance ratio tests to verify the random walk hypothesis. In a general form European capital markets are efficient referent to past information during current crisis. Moreover, through marginal and Pair Copula Construction models, we predict daily Value at Risk for each market and for the portfolio composed by them. Individual risk predictions are correctly simulated. Simulations performed through PCC model properly predict the composed portfolio risk, highlighting that in this crisis period it is crucial to use a tool enable to make correct predictions about risk. The proposed approach emerges as a solution to this task.

Keywords: Risk management; Value at Risk; Market efficiency; Eurozone financial crisis; Pair Copula Construction (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521913000914
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:30:y:2013:i:c:p:384-393

DOI: 10.1016/j.irfa.2013.07.011

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().