Forecasting Value at Risk in Emerging Arab Stock Markets

C. Guermat, Kaddour Hadri () and Cumhur Küçüközmen ()
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C. Guermat: Department of Economics, University of Exeter

No 303, Discussion Papers from University of Exeter, Department of Economics

Abstract: The economic and political instability of most of the Arab countries may lead to the assumption that Arab stock markets are riskier and less predictable than stock markets in developed countries. Value at Risk (VaR) measures risk exposure at a given probability level and is very important for risk management. In this paper extreme value theory with volatility updating is used to forecast Value at Risk in three emerging Arab stock markets and the US stock market. Several forecast accuracy criteria are used to compare forecast performance in the four stock markets, including a suggested asymmetric forecast criterion. The various criteria used in this paper suggest that Arab stock markets are less risky than the US stock market.

Keywords: Value-at-Risk; Extreme Events; Hill Estimator; Volatility Updating. (search for similar items in EconPapers)
JEL-codes: C22 C40 G10 G21 (search for similar items in EconPapers)
Date: 2003-12
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