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Modelling tail dependencies between Russian and foreign stock markets: Application for market risk valuation

Author

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  • Makushkin, Mikhail

    (National Research University Higher School of Economics (NRU HSE). Moscow, Russian Federation)

  • Lapshin, Victor

    (National Research University Higher School of Economics (NRU HSE). Moscow, Russian Federation)

Abstract

The article examines cross dependencies in risks of Russian and foreign stock markets. Bivariate quantile autoregression VAR for VaR is used to achieve this goal. It is shown that Russia is a net receiver of external risk. Tail dependencies between markets tend to increase in turbulent times. Information about them helps to better predict market risks. However, for business use less sophisticated risk models are recommended. The results might be applied for risk-management purposes.

Suggested Citation

  • Makushkin, Mikhail & Lapshin, Victor, 2020. "Modelling tail dependencies between Russian and foreign stock markets: Application for market risk valuation," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 57, pages 30-52.
  • Handle: RePEc:ris:apltrx:0386
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    More about this item

    Keywords

    risk valuation; tail dependencies; risk spillovers; risk management; international stock markets; VaR; CAViaR; VAR for VaR.;
    All these keywords.

    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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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