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Performance of VaR in Developed and CEE Countries during the Global Financial Crisis

Author

Listed:
  • Mirjana Miletić

    (National bank of Serbia.)

  • Siniša Miletić

    (College for Business Economics and Entrepreneurship.)

Abstract

The aim of this paper is to compare performance of Value at Risk (VaR) models in selected developed and emerging countries in Central and Eastern Europe before and during the financial crisis. Daily returns of stock indices are analysed during the period October 4, 2005- May 31, 2007, and during the post crisis period, June 1, 2007 – October 7, 2015. We employ symmetric and asymmetric GARCH models as VaR forecast models. The performance of the VaR is assessed by the Kupiec test of unconditional coverage. The results of backtesting show that such a GARCH-type VaR assuming Student's t distribution of standardized returns is in most cases a superior measure of downside risk at 99% of confidence level for both sample periods. Results also indicate that VaR is a beter measure of market risk for the developed than the CEE countries during the pre-crisis period, while during the crisis period the results are opposite.

Suggested Citation

  • Mirjana Miletić & Siniša Miletić, 2016. "Performance of VaR in Developed and CEE Countries during the Global Financial Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 54-75, March.
    • Handle: RePEc:rjr:romjef:v::y:2016:i:1:p:54-75
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    References listed on IDEAS

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    Cited by:

    1. Alin Marius ANDRIEŞ & Iulian IHNATOV & Nicu SPRINCEAN, 2017. "Do Seasonal Anomalies Still Exist In Central And Eastern European Countries? A Conditional Variance Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 60-83, December.

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    More about this item

    Keywords

    Value-at-risk (VaR); global financial crisis; GARCH Models; backtesting; Kupiec test;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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