Extreme movements of the main stocks traded in the Eurozone: an analysis by sectors in the 2000's decade

Emma Iglesias and Mar�a Dolores Lagoa Varela

Applied Financial Economics, 2012, vol. 22, issue 24, 2085-2100

Abstract: We have analysed extreme movements of the main stocks traded in the Eurozone by sectors in the 2000's decade. We find several patterns. First , we can classify firms by sector according to their different estimated Value-at-Risk (VaR) values but we cannot find differences according to their geographical situation. Second , we find sectors where companies have very high (telecommunications and banking) and very low (petroleum, utilities, energy and consumption) estimated VaR values. Other sectors such as industry are very heterogeneous. Third , we get differences when we analyse the correlation between average return and VaR estimates: higher average return is found in firms with smaller risk in extreme events in the banking and consumption subsectors; however, higher return with higher estimated VaR values occurs in the utilities (electricity and gas) subsector, being less attractive for very risk-averse investors. Finally , our results show that very risk-averse investors that are looking for high average return and low estimated VaR should choose the following firms classified by sector: Danone and Sanofi-Aventis (consumption), Bbva (financial services), Eni Spa and Iberdrola (petroleum and energy) and Telefonica (technology and telecommunications).

Date: 2012
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DOI: 10.1080/09603107.2012.697121

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