Title of article :
Financial Risk Evaluations in Malaysian Stock Exchange using Extreme-Value-Theory and Component-ARCH Model
Author/Authors :
WEN CHEONG, CHIN Multimedia University - Faculty of Information Technology, Malaysia , ZAIDI, ISA Universiti Kebangsaan Malaysia - Faculty of Science and Technology, Malaysia , ABU HASSAN SHAARI, MOHD NOR Universiti Kebangsaan Malaysia - Faculty of Economics and Business, Malaysia
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 quantiles. 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.
Keywords :
ARCH , heavy , tail distribution , long , persistence volatility , value , at , risk