IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Value-at-risk under extreme values: the relative performance in MENA emerging stock markets

  • Aktham I. Maghyereh
  • Haitham A. Al-Zoubi

Purpose – The paper aims to investigate the relative performance of the most popular value-at-risk (VaR) estimates with an emphasis on the extreme value theory (EVT) methodology for seven Middle East and North Africa (MENA) countries. Design/methodology/approach – The paper calculates tails distributions of return series by EVT. This allows computing VaR and comparing the results with Variance-Covariance method, Historical simulation, and ARCH-type process with normal distribution, Student-t distribution and skewed Student-t distribution. The paper assesses the performance of the models, which are used in VaR estimations, based on their empirical failure rates. Findings – The empirical results demonstrate that the return distributions of the MENA markets are characterized by fat tails which implies that VaR measures relies on the normal distribution will underestimate VaR. The results suggest that the extreme value approach, by modeling the tails of the return distributions, are more relevant to measure VaR in most of the MENA. Research limitations/implications – The results show that the use of conventional methodologies such as the normal distribution model to estimate the financial market risk in MENA countries may lead to faulty estimation of risk in the world of volatile markets. Originality/value – The paper tried to fill the gap in the literature and perform an evaluation of the relative performance of the most popular VaR estimates with an emphasis on the EVT methodology in seven MENA emerging stock markets. A comparison of the performance between EVT and other VaR techniques should support the decision whether more or less sophisticated methods are appropriate in order to assess stock market risks in the MENA countries.

If 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.

File URL: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=4F3EC58394B176945BD77475D26A755E?contentType=Article&contentId=1550165
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Emerald Group Publishing in its journal International Journal of Managerial Finance.

Volume (Year): 2 (2006)
Issue (Month): 2 (July)
Pages: 154-172

as
in new window

Handle: RePEc:eme:ijmfpp:v:2:y:2006:i:2:p:154-172
Contact details of provider: Web page: http://www.emeraldinsight.com

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=ijmf Email:


No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eme:ijmfpp:v:2:y:2006:i:2:p:154-172. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.