Risk-management criteria in the Latin-American stock markets: an assessment with a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry

Arturo Lorenzo-Valdés and Antonio Ruíz-Porras
Authors registered in the RePEc Author Service: Antonio Ruiz-Porras

International Journal of Computational Economics and Econometrics, 2015, vol. 5, issue 4, 430-450

Abstract: We build a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry. We use the model for modelling series of stock-market returns and for investigating some risk-management criteria prevailing in the Latin-American stock markets. The main results support the usefulness of the model. Particularly, they suggest that hedging and diversification practices among the markets may be useful for risk-management purposes. Moreover, they suggest that the most risk-averse investors are in Argentina and the least risk-averse ones in Colombia. Furthermore, they imply that the behaviour of investors may be more complex than the one postulated by the mean-variance paradigm.

Keywords: stock markets; TGARCH model; skewed normal distribution; autoregressive conditional asymmetry; stock market returns; risk management; Latin America; modelling; risk-averse investors. (search for similar items in EconPapers)
Date: 2015
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