Risk estimation and validation for unconditional stock market returns

Zetty Ain Kamaruzzaman, Zaidi Isa

Research output: Contribution to journalArticle

Abstract

Market risk analysis using Value-at-Risk (VaR) and conditional Value-at-Risk (CVaR) have become a popular concept in financial risk management nowadays. At the same time, statistical distributions also play a vital role in market risk analysis. This paper presents the concepts, methods and tools with the use of statistical distribution in risk estimation and validation. In this paper, we estimate the unconditional stock market returns distribution, Value-at-Risk (VaR) and conditional Value-at-Risk (CVaR) for monthly rates of returns for FTSE Bursa Malaysia Hijrah Shariah Index, FTSE Bursa Malaysia EMAS Shariah Index and FTSE Bursa Malaysia ACE Index. First, we present the application in empirical finance where we fit our real data based on its best-fitting distribution. Next, we present the application of risk analysis where we apply the best-fitting distribution to estimate the Value-at-Risk (VaR) and conditional Value-at-Risk (CVaR). Lastly, we evaluate the model validation for both risk measures.

Original languageEnglish
Pages (from-to)3793-3803
Number of pages11
JournalGlobal Journal of Pure and Applied Mathematics
Volume11
Issue number5
Publication statusPublished - 2015

Fingerprint

Conditional Value at Risk
Value at Risk
Malaysia
Risk Analysis
Stock Market
Statistical Distribution
Financial Risk
Risk analysis
Risk Measures
Model Validation
Risk Management
Finance
Estimate
Evaluate
Financial markets
Risk management
Market
Concepts

Keywords

  • Market behavior
  • Market risk
  • Risk management
  • Statistical distribution

ASJC Scopus subject areas

  • Mathematics(all)
  • Applied Mathematics

Cite this

Risk estimation and validation for unconditional stock market returns. / Kamaruzzaman, Zetty Ain; Isa, Zaidi.

In: Global Journal of Pure and Applied Mathematics, Vol. 11, No. 5, 2015, p. 3793-3803.

Research output: Contribution to journalArticle

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