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Assessing Market Risk During Financial Crises - An Applicable Method Of Using Value At Risk And Expected Shortfall In Investments

Author

Listed:
  • BOTOROGA Cosmin-Alin

    (Bucharest University of Economic Studies, Romania)

  • HOROBET Alexandra

    (Bucharest University of Economic Studies, Romania)

  • BELASCU Lucian

    (Lucian Blaga University of Sibiu, Romania)

Abstract

Amid financial crises, the risk of losing money from the investing activity is higher due to the volatility of the market, and unpredictable movements of the prices. Thus, methods for risk measurement such as Value at risk and expected shortfall, help investors and fund managers to prepare for the potential losses and hedge accordingly. This paper summarizes the last three major crises (dot com bubble, the housing market bubble, and healthcare crisis) in an attempt to decide which of them induced the highest market risk, by applying Value at risk and expected shortfall methods to S&P 500 index. Knowing the past and learning from how the stock market moved during these crises help the investors to prepare for future crises.

Suggested Citation

  • BOTOROGA Cosmin-Alin & HOROBET Alexandra & BELASCU Lucian, 2021. "Assessing Market Risk During Financial Crises - An Applicable Method Of Using Value At Risk And Expected Shortfall In Investments," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 73(3), pages 51-74, October.
    • Handle: RePEc:blg:reveco:v:73:y:2021:i:3:p:51-74
    as

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    File URL: http://economice.ulbsibiu.ro/revista.economica/archive/73302botoroga&horobet&belascu.pdf
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    References listed on IDEAS

    as
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    3. Brooks, Chris & Burke, Simon P. & Persand, Gita, 2001. "Benchmarks and the accuracy of GARCH model estimation," International Journal of Forecasting, Elsevier, vol. 17(1), pages 45-56.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    VaR; ES; market risk; student t distribution; GARCH;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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