Financial risk evaluations in Malaysian stock exchange using extreme-value-theory and component-ARCH model

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

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This study investigates the value-at-risk (VaR) using nonlinear time-varying volatility (ARCH model) and extreme-value-theory (EVT) methodologies. Similar VaR estimation and prediction are observes under the EVT and heavy-tailed long-memory ARCH approaches. The empirical results evidence the EVT-based VaR are more accurate but only at higher quantites. It is also found that EVT approach is able to provide a convenient framework for asymmetric properties in both the lower and upper tails which implies that the risk and reward are not equally likely for the short- and long-trading positions in Malaysian stock market.

Original languageEnglish
Pages (from-to)567-575
Number of pages9
JournalSains Malaysiana
Volume38
Issue number4
Publication statusPublished - Aug 2009

Fingerprint

Autoregressive conditional heteroscedasticity
Risk evaluation
Stock exchange
Financial risk
Extreme value theory
Value at risk
Long memory
Time-varying volatility
Empirical results
Stock market
Reward
Prediction
Methodology

Keywords

  • ARCH
  • Heavy-tail distribution
  • Long-persistence volatility
  • Value-at-risk

ASJC Scopus subject areas

  • General

Cite this

Financial risk evaluations in Malaysian stock exchange using extreme-value-theory and component-ARCH model. / Cheong, Chin Wen; Isa, Zaidi; Md Nor, Abu Hassan Shaari.

In: Sains Malaysiana, Vol. 38, No. 4, 08.2009, p. 567-575.

Research output: Contribution to journalArticle

Cheong, Chin Wen ; Isa, Zaidi ; Md Nor, Abu Hassan Shaari. / Financial risk evaluations in Malaysian stock exchange using extreme-value-theory and component-ARCH model. In: Sains Malaysiana. 2009 ; Vol. 38, No. 4. pp. 567-575.
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