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Forcasting portofolio value-at-risk for international stocks, bonds, and foreign exchange emerging market evidence

Author

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  • Abdul Hakim

    (Fakultas Ekonomi, Universitas Islam Indonesia)

Abstract

This paper uncovers the nature of conditional correlations between and volatility spillovers across bond, stock and foreign exchange in Indonesia, Malaysia, the Philippines, and Thailand. Using various multivariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models, it finds the evidence of highly persistence in the conditional variance, volatility spillovers across assets, and time-varying conditional correlations in all markets. It also provides Value-at-Risk forecast based on the estimated models. Assuming normal distribution, the tests suggest that incorporating volatility spillovers and time-varying conditional correlations does not help in providing Value-at-Risk forecasts. Assuming t distribution, the tests suggest that incorporating volatility spillovers provides better VaR forecasts.

Suggested Citation

  • Abdul Hakim, 2009. "Forcasting portofolio value-at-risk for international stocks, bonds, and foreign exchange emerging market evidence," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 1(1), pages 13-26, April.
    • Handle: RePEc:uii:journl:v:1:y:2009:i:1:p:13-26
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    References listed on IDEAS

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    More about this item

    Keywords

    conditional correlations; volatility spillovers; VaR forecast;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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