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Value at Risk of the main stock market indexes in the European Union (2000–2012)

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  • Iglesias, Emma M.

Abstract

We analyze extreme movements of the main stocks market indexes in the European Union. We find that the Sweden and UK markets are the preferred ones for risk averse investors since they present the best risk-return performance. Moreover, the UK market is found to have a very low dependence with the rest of the European financial cycles, being the best one (in terms of risk-return) available for investors among the ones studied in this paper. Greece and Holland have the worst performance in terms of risk-return. Austria has the highest average return although the VaR is also high. Moreover, all markets are found to be linked: Austria, Belgium, Germany, Ireland and UK are the markets that are less dependent; while France, Greece, Holland, Italy, Spain and Sweden are more dependent on the rest of the European financial cycles. We find a very strong dependence of France from Belgium. Our results have very important policy implications with respect to the appropriate monetary policy that countries should adopt. In special, countries that experience unstable financial markets should consider similar macroeconomic policies to the UK and Sweden.

Suggested Citation

  • Iglesias, Emma M., 2015. "Value at Risk of the main stock market indexes in the European Union (2000–2012)," Journal of Policy Modeling, Elsevier, vol. 37(1), pages 1-13.
  • Handle: RePEc:eee:jpolmo:v:37:y:2015:i:1:p:1-13
    DOI: 10.1016/j.jpolmod.2015.01.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Value-at-Risk; Extreme value theory; Heavy tails; Stock market indexes; Eurozone;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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