Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH
Paul Bui Quang (),
Tony Klein (),
Nam H. Nguyen () and
Thomas Walther ()
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Paul Bui Quang: John von Neumann Institute, Vietnam National University, Ho Chi Minh City, Vietnam
Tony Klein: Queen’s Management School, Queen’s University Belfast, Belfast BT7 1NN, UK
Nam H. Nguyen: John von Neumann Institute, Vietnam National University, Ho Chi Minh City, Vietnam
Journal of Risk and Financial Management, 2018, vol. 11, issue 2, 1-20
This study compares the performance of several methods to calculate the Value-at-Risk of the six main ASEAN stock markets. We use filtered historical simulations, GARCH models, and stochastic volatility models. The out-of-sample performance is analyzed by various backtesting procedures. We find that simpler models fail to produce sufficient Value-at-Risk forecasts, which appears to stem from several econometric properties of the return distributions. With stochastic volatility models, we obtain better Value-at-Risk forecasts compared to GARCH. The quality varies over forecasting horizons and across markets. This indicates that, despite a regional proximity and homogeneity of the markets, index volatilities are driven by different factors.
Keywords: ASEAN; GARCH; stochastic volatility; Value-at-Risk (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:11:y:2018:i:2:p:18-:d:139768
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