The extreme-value dependence between the Chinese and other international stock markets
AbstractExtreme Value Theory (EVT) measures the behaviour of extreme observations on a random variable. EVT in risk management, an approach to modelling and measuring risks under rare events, has taken on a prominent role in recent years. This article contributes to the literature in two respects by analysing an interesting international financial data set. First, we apply conditional EVT to examine the Value at Risk (VaR) and the Expected Shortfall (ES) for the Chinese and several representative international stock market indices: Hang Seng (Hong Kong), TSEC (Taiwan), Nikkei 225 (Japan), Kospi (Korea), BSE (India), STI (Singapore), S&P 500 (US), SPTSE (Canada), IPC (Mexico), CAC 40 (France), DAX 30 (Germany), FTSE100 (UK) index. We find that China has the highest VaR and ES for negative daily stock returns. Second, we examine the extreme dependence between these stock markets, and we find that the Chinese market is asymptotically independent of the other stock markets considered.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 22 (2012)
Issue (Month): 14 (July)
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Web page: http://www.tandfonline.com/RAFE20
Other versions of this item:
- David E. Giles, 2010. "The Extreme-Value Dependence Between the Chinese and Other International Stock Markets," Econometrics Working Papers 1003, Department of Economics, University of Victoria.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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