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Modelling the Risk at the Central European Stock Exchange at times of Crisis

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  • Nigohos Kanaryan
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    Abstract

    The present study represents a model of risk at the Central European Stock Exchange, measured as the yield dispersion of the CESI index. The period under analysis – 30 June 1995 – 31 May 2002 is divided into three subperiods – precrisis, crisis and postcrisis. The main characteristics of the market are identified and those are found to be the same for the group of developing stock exchanges. The observed high levels of the excess coefficient and accumulated volatility represent the time changing nature of risk. That in its turn allows us to model it using the GARCH model approach. From the 17 GARCH models presented, the asymmetric models, which presuppose probabilistic dispersion of errors that is different from the norm, feature the highest risk projection capability.

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    Bibliographic Info

    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.

    Volume (Year): (2004)
    Issue (Month): 3 ()
    Pages: 70-83

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    Handle: RePEc:bas:econth:y:2004:i:3:p:70-83

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    1. Akgiray, Vedat, 1989. "Conditional Heteroscedasticity in Time Series of Stock Returns: Evidence and Forecasts," The Journal of Business, University of Chicago Press, vol. 62(1), pages 55-80, January.
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    4. Sentana,E., 1995. "Quadratic Arch Models," Papers 9517, Centro de Estudios Monetarios Y Financieros-.
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    7. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
    8. Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Financial Markets in Times of Stress," NBER Working Papers 8569, National Bureau of Economic Research, Inc.
    9. Choudhry, Taufiq, 1996. "Stock market volatility and the crash of 1987: evidence from six emerging markets," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 969-981, December.
    10. Jang, Hoyoon & Sul, Wonsik, 2002. "The Asian financial crisis and the co-movement of Asian stock markets," Journal of Asian Economics, Elsevier, vol. 13(1), pages 94-104.
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