Estimates of the likelihood of extreme returns in international stock markets
This study applies extreme-value theory to daily international stock-market returns to determine (1) whether or not returns follow a heavy-tailed stable distribution, (2) the likelihood of an extreme return, such as a 20% drop in a single day, and (3) whether or not the likelihood of an extreme event has changed since October 1987. Empirical results reject a heavy-tailed stable distribution for returns. Instead, a Student-t distribution or an autoregressive conditional heteroscedastic process is better able to capture the salient features of returns. We find that the likelihood of a large single-day return diff ers widely across markets and, for the G-7 countries, the 1987 stock-market drop appears to be largely an isolated event. A drop of this magnitude, however, is not rare in the case of Hong Kong. Finally, there is only limited evidence that the chance of a large single-day decline is more likely since the October 1987 market drop; however, exceptions include stock markets in Germany, The Netherlands and the UK.
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.
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.
Volume (Year): 27 (2000)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CJAS20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CJAS20|
When requesting a correction, please mention this item's handle: RePEc:taf:japsta:v:27:y:2000:i:1:p:119-130. 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: (Chris Longhurst)
If references are entirely missing, you can add them using this form.