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Global financial crisis and VaR performance in emerging markets: A case of EU candidate states - Turkey and Croatia

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Author Info

  • Sasa Zikovic

    ()
    (University of Rijeka, Faculty of Economics, Rijeka, Croatia)

  • Bora Aktan

    (Yasar University, Faculty of Economics and Administrative Sciences, Izmir, Turkey)

Abstract

We investigate the relative performance of a wide array of Value at Risk (VaR) models with the daily returns of Turkish (XU100) and Croatian (CROBEX) stock index prior to and during the ongoing financial crisis. In addition to widely used VaR models, we also study the behaviour of conditional and unconditional extreme value theory (EVT) and hybrid historical simulation (HHS) models to generate 95, 99 and 99.5% confidence level estimates. Results indicate that during the crisis period all tested VaR model except EVT and HHS models seriously underpredict the true level of risk, with EVT models doing so at a higher cost of capital com- pared to HHS model.

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Bibliographic Info

Article provided by University of Rijeka, Faculty of Economics in its journal Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics.

Volume (Year): 27 (2009)
Issue (Month): 1 ()
Pages: 149-170

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Handle: RePEc:rfe:zbefri:v:27:y:2009:i:1:p:149-170

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Related research

Keywords: financial crisis; emerging markets; Value at Risk; extreme value theory; hybrid historical simulation;

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  1. Ozun, Alper & Cifter, Atilla & Yilmazer, Sait, 2007. "Filtered Extreme Value Theory for Value-At-Risk Estimation," MPRA Paper 3302, University Library of Munich, Germany.
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Cited by:
  1. Abad, Pilar & Benito, Sonia, 2013. "A detailed comparison of value at risk estimates," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 94(C), pages 258-276.

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