Performance of VaR in Developed and CEE Countries during the Global Financial Crisis

Mirjana Miletić () and Siniša Miletić ()
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Mirjana Miletić: National bank of Serbia.
Siniša Miletić: College for Business Economics and Entrepreneurship.

Journal for Economic Forecasting, 2016, issue 1, 54-75

Abstract: The aim of this paper is to compare performance of Value at Risk (VaR) models in selected developed and emerging countries in Central and Eastern Europe before and during the financial crisis. Daily returns of stock indices are analysed during the period October 4, 2005- May 31, 2007, and during the post crisis period, June 1, 2007 – October 7, 2015. We employ symmetric and asymmetric GARCH models as VaR forecast models. The performance of the VaR is assessed by the Kupiec test of unconditional coverage. The results of backtesting show that such a GARCH-type VaR assuming Student's t distribution of standardized returns is in most cases a superior measure of downside risk at 99% of confidence level for both sample periods. Results also indicate that VaR is a beter measure of market risk for the developed than the CEE countries during the pre-crisis period, while during the crisis period the results are opposite.

Keywords: Value-at-risk (VaR); global financial crisis; GARCH Models; backtesting; Kupiec test (search for similar items in EconPapers)
JEL-codes: C14 C22 C52 G24 G32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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