Evolution of Equity Market Risk During the Crisis: Europe, Americas and Asia
AbstractA set of regional and country’s equity indices have been evaluated and analysed in their Value at Risk (VaR) and Conditional Value at Risk (CVaR) in this paper, using computational methods based on the Johnson systems. Comparing the main statistics and the values of the two cited measures of financial risk obtained using a roll-over mechanism in the period January 2008–July 2012, the impact of the crisis on equity market risk can be shown. It seems that for all regions and countries the patterns are very similar: there is a peak of all the risk measures adopted at the beginning of the crisis (September 2008–February 2009) and another turbulent period in 2011 (from July to December). In other terms, the global patterns of the main financially relevant countries and their regional aggregations demonstrate that “One Financial system”, and just one, is already at work, in theory and in practice. On the other hand, the scale of the risk measures differs from one country to another: e.g., with a probability of 1 %, the potential daily loss on an equity position in Latin America in the worst period arrives to about 25 %, the Emerging Markets as a whole show values around 20 % and Asia arrives to 15 %, while the US and European corresponding values are below 14 %. This is true whatever the risk measure and whatever the confidence interval (which, again, influences strongly the scale of the risk values). Looking in detail to the last period (April 2012–July 2012), a general improvement could be appreciated: the risk measures are all around 4 % if not on one hand Italy and Spain (around 6 %), Greece (around 10 %) and on the other hand the “virtuous” Chile (around 1.5 %), again with reference to a probability of 1 %. Nevertheless, indices of performance (expected return over risk measure) have been evaluated and compared. They give sometimes different answers to the risk measures themselves. Copyright Springer-Verlag Wien 2012
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Bibliographic InfoArticle provided by Springer in its journal Transition Studies Review.
Volume (Year): 19 (2012)
Issue (Month): 2 (November)
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Web page: http://www.springerlink.com/link.asp?id=112913
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G01 - Financial Economics - - General - - - Financial Crises
- F30 - International Economics - - International Finance - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
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