Evaluation of long memory and asymmetric value-at-risk for long and short trading positions: An empirical study of Malaysian stock market

Wen Cheong Chin, Abu Hassan Shaari Md Nor, Zaidi Isa

Research output: Contribution to journalArticle

Abstract

In this paper, we analyze the asymmetric long memory volatility of Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange, KLSE) using daily data, The long memory behaviour of the stock returns is examines by variance-time plot, rescaled-range (R/S) analysis and Whittle's estimator. With the evidence of long memory behaviour, the volatility is estimates by using the component Generalized AutoRegressive Conditional Heteroscedasticity (Component-GARCH) and fractionally integrated GARCH modelling (FiGARCH), A battery of statistical tests has been employed to diagnose the model specifications. The evaluations of the one-step-ahead volatility forecasting are base on the realized volatility with the scaled sum of the 30-minute returns without using the returns of non-trading hours, It is found that the asymmetric and long memory models exhibited better predictability. Finally, the Value at risk (VaR) for long and short trading positions is determines base on the estimated benchmark GARCH models.

Original languageEnglish
Pages (from-to)1-17
Number of pages17
JournalInternational Journal of Business and Society
Volume10
Issue number1
Publication statusPublished - 2009

Fingerprint

Empirical study
Value at risk
Stock market
Evaluation
Long memory
Estimator
Rescaled range
Statistical tests
Predictability
Stock returns
Benchmark
Integrated
Realized volatility
Long memory models
Malaysia
GARCH model
Generalized autoregressive conditional heteroscedasticity
Stock exchange
Volatility forecasting
GARCH modeling

Keywords

  • ARCH
  • Econometrics
  • Financial time series
  • Long memory process
  • Value-at-risk

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Strategy and Management
  • Business and International Management

Cite this

Evaluation of long memory and asymmetric value-at-risk for long and short trading positions : An empirical study of Malaysian stock market. / Chin, Wen Cheong; Md Nor, Abu Hassan Shaari; Isa, Zaidi.

In: International Journal of Business and Society, Vol. 10, No. 1, 2009, p. 1-17.

Research output: Contribution to journalArticle

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