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Risks of Turkish Industries During Financial Crisis

Harun Sencal and Mehmet Orhan
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Harun Sencal: Fatih Universitesi
Mehmet Orhan: Fatih Universitesi

Iktisat Isletme ve Finans, 2014, vol. 29, issue 343, 83-104

Abstract: In this study, we analyze the risk aspects of subsectors in Turkey before and after the global financial crisis based on ISE indices of industries. First, we report the descriptive statistics of 19 subsectors. Then, we make use of GARCH (1,1) specification to estimate the volatility of the indices changing over time. We use the Kupiec and Christoffersen Tests to evaluate the success of VaR estimation. We split the duration of the analysis into two subperiods for more elaborate analysis: 2004 (April) - 2007 (July) and 2007(August)-2013(March). Our findings suggest that although VaR based on GARCH (1, 1) model seems a reliable model at 99% confidence level, it is relatively less reliable in terms of predicting the correct number of extreme losses at 90% and 95% confidence levels. Furthermore, this study shows that the global financial crisis affected the performance of VaR based on GARCH (1, 1) model at all confidence levels.

Keywords: Value-at-Risk; Global Financial Crisis; GARCH; Borsa Istanbul; Kupiec Test; Christoffersen Test (search for similar items in EconPapers)
JEL-codes: C22 G01 G11 (search for similar items in EconPapers)
Date: 2014
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