Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH

Paul Bui Quang; Tony Klein; Nam H. Nguyen; Thomas Walther

doi:10.3390/jrfm11020018

Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH

Paul Bui Quang, Tony Klein, Nam H. Nguyen, Thomas Walther

Queen's Management School

Research output: Contribution to journal › Article › peer-review

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Abstract

This study compares the performance of several methods to calculate the Value-at-Risk of the six main ASEAN stock markets. We use filtered historical simulations, GARCH models, and stochastic volatility models. The out-of-sample performance is analyzed by various backtesting procedures. We find that simpler models fail to produce sufficient Value-at-Risk forecasts, which
appears to stem from several econometric properties of the return distributions. With stochastic volatility models, we obtain better Value-at-Risk forecasts compared to GARCH. The quality varies over forecasting horizons and across markets. This indicates that, despite a regional proximity and homogeneity of the markets, index volatilities are driven by different factors.

Original language	English
Pages (from-to)	1-19
Journal	Journal of Risk and Financial Management
Volume	11
Issue number	2
DOIs	https://doi.org/10.3390/jrfm11020018
Publication status	Published - 05 Apr 2018

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10.3390/jrfm11020018Licence: CC BY

Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH
Copyright 2018 the authors. This is an open access article published under a Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium, provided the author and source are cited.
Final published version, 413 KBLicence: CC BY

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