Downside Risk for European Equity Markets
AbstractThis paper applies extreme value theory to measure downside risk for European equity markets. Two related measures, value at risk and the excess loss probability estimator provide a coherent approach to optimally protect investor wealth opportunities for low quantile and probability combinations. The fat-tailed characteristic of equity index returns is captured by explicitly modelling tail returns only. The paper finds the DAX100 is the most volatile index, and this generally becomes more pronounced as one moves to lower quantile and probability estimates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3537.
Date of creation: 2004
Date of revision:
Other versions of this item:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G1 - Financial Economics - - General Financial Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Poon, Ser-Huang & Taylor, Stephen J., 1992. "Stock returns and volatility: An empirical study of the UK stock market," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 37-59, February.
- Arzac, Enrique R. & Bawa, Vijay S., 1977. "Portfolio choice and equilibrium in capital markets with safety-first investors," Journal of Financial Economics, Elsevier, vol. 4(3), pages 277-288, May.
- Jon DANIELSSON & Casper G. DE VRIES, 2000.
"Value-at-Risk and Extreme Returns,"
Annales d'Economie et de Statistique,
ENSAE, issue 60, pages 239-270.
- Koedijk, Kees G & Kool, Clemens J M, 1992.
"Tail Estimates of East European Exchange Rates,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(1), pages 83-96, January.
- Jon Danielsson & Casper G. de Vries, 1998.
"Beyond the Sample: Extreme Quantile and Probability Estimation,"
FMG Discussion Papers
dp298, Financial Markets Group.
- Jón Daníelsson & Casper G. de Vries, 1998. "Beyond the Sample: Extreme Quantile and Probability Estimation," Tinbergen Institute Discussion Papers 98-016/2, Tinbergen Institute.
- Jansen, Dennis W. & Koedijk, Kees G. & de Vries, Casper G., 2000. "Portfolio selection with limited downside risk," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 247-269, November.
- Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998.
"Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
98-081, New York University, Leonard N. Stern School of Business-.
- Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998. "Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management," Center for Financial Institutions Working Papers 98-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
- Cotter, John, 2000.
"Margin Exceedences for European Stock Index Futures using Extreme Value Theory,"
3534, University Library of Munich, Germany, revised 2001.
- Cotter, John, 2001. "Margin exceedences for European stock index futures using extreme value theory," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1475-1502, August.
- Phillip Kearns & Adrian Pagan, 1997. "Estimating The Density Tail Index For Financial Time Series," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 171-175, May.
- Subu Venkataraman, 1997. "Value at risk for a mixture of normal distributions: the use of quasi- Bayesian estimation techniques," Economic Perspectives, Federal Reserve Bank of Chicago, issue Mar, pages 2-13.
- Liam Gallagher, 1999. "A multi-country analysis of the temporary and permanent components of stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 9(2), pages 129-142.
- Ghose, Devajyoti & Kroner, Kenneth F., 1995. "The relationship between GARCH and symmetric stable processes: Finding the source of fat tails in financial data," Journal of Empirical Finance, Elsevier, vol. 2(3), pages 225-251, September.
- Marco Rocco, 2011. "Extreme value theory for finance: a survey," Questioni di Economia e Finanza (Occasional Papers) 99, Bank of Italy, Economic Research and International Relations Area.
- Cotter, John, 2006.
"Modelling catastrophic risk in international equity markets: An extreme value approach,"
3507, University Library of Munich, Germany.
- John Cotter, 2006. "Modelling catastrophic risk in international equity markets: an extreme value approach," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 13-17, January.
- john cotter, 2011. "Modelling catastrophic risk in international equity markets: An extreme value approach," Papers 1103.5656, arXiv.org.
- John Cotter, 2011. "Modelling Catastrophic Risk in International Equity Markets: An Extreme Value Approach," Working Papers 200515, Geary Institute, University College Dublin.
- Sasa Zikovic & Randall Filer, 2012.
"Ranking of VaR and ES Models: Performance in Developed and Emerging Markets,"
CESifo Working Paper Series
3980, CESifo Group Munich.
- Saša ŽIKOVIÆ & Randall K. FILER, 2013. "Ranking of VaR and ES Models: Performance in Developed and Emerging Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(4), pages 327-359, August.
- John Cotter, 2005. "Extreme risk in futures contracts," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 489-492.
- Cotter, John, 2004. "Modelling extreme financial returns of global equity markets," MPRA Paper 3532, University Library of Munich, Germany.
- Sasa Zikovic & Randall Filer, 2009. "Hybrid Historical Simulation VaR and ES: Performance in Developed and Emerging Markets," CESifo Working Paper Series 2820, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.