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Extreme movements of the Russian stock market and their consequences for management and economic modeling

Author

Listed:
  • Ankudinov, Andrei

    (Kazan Federal University, Kazan, Russian Federation)

  • Ibragimov, Rustam

    (Imperial College London, London, UK)

  • Lebedev, Oleg

    (Innopolis University, Innopolis, Russian Federation)

Abstract

The article presents the results of testing the degree of heavy-tailedness for Russian companies’ returns distributions. The estimation is based on the robust approach of log-log rank-size regressions with the optimal shift and correct standard errors. The obtained results indicate that the Russian stock market is somewhat more prone to extreme movements when compared to those of the developed as well as some developing countries. In certain cases such behavior may lead to unreliability of standard statistical methods based on variance and correlations, to negative value of portfolio diversification as well as to unreliability of some popular risk-management techniques. The obtained results may be also relevant for macroeconomic forecasting.

Suggested Citation

  • Ankudinov, Andrei & Ibragimov, Rustam & Lebedev, Oleg, 2017. "Extreme movements of the Russian stock market and their consequences for management and economic modeling," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 45, pages 75-92.
    • Handle: RePEc:ris:apltrx:0311
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    References listed on IDEAS

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    Cited by:

    1. Makushkin, Mikhail & Lapshin, Victor, 2020. "Modelling tail dependencies between Russian and foreign stock markets: Application for market risk valuation," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 30-52.

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    More about this item

    Keywords

    extreme movements; stock returns; heavy tails; returns asymmetry; risk management;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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