The Extreme-Value Dependence Between the Chinese and Other International Stock Markets
David Giles ()
No 1003, Econometrics Working Papers from Department of Economics, University of Victoria
Extreme value theory (EVT) measures the behavior of extreme observations on a random variable. EVT in risk management, an approach to modeling and measuring risks under rare events, has taken on a prominent role in recent years. This paper contributes to the literature in two respects by analyzing an interesting international financial data set. First, we apply conditional EVT to examine the Value at Risk (VAR) and the Expected Shortfall (ES) for the Chinese and several representative international stock market indices: Hang Seng (Hong Kong), TSEC (Taiwan), Nikkei 225 (Japan), Kospi (Korea), BSE (India), STI (Singapore), S&P 500 (US), SPTSE (Canada), IPC (Mexico), CAC 40 (France), DAX 30 (Germany), FTSE100 (UK) index. We find that China has the highest VaR and ES for negative daily stock returns. Second, we examine the extreme dependence between these stock markets, and we find that the Chinese market is asymptotically independent of the other stock markets considered.
Keywords: Extreme value analysis; peaks-over-threshold; value at risk; expected shortfall; asymptotic dependence; Chinese equity market (search for similar items in EconPapers)
JEL-codes: C13 C16 C58 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg and nep-sea
Note: ISSN 1485-6441
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Journal Article: The extreme-value dependence between the Chinese and other international stock markets (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:1003
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