TY - JOUR
T1 - Worldwide equity risk prediction
AU - Ardia, David
AU - Hoogerheide, Lennart F.
PY - 2013
Y1 - 2013
N2 - Various GARCH models are applied to daily returns of more than 1200 constituents of major stock indices worldwide. The value-at-risk forecast performance is investigated for different markets and industries, considering the test for correct conditional coverage using the false discovery rate (FDR) methodology. For most of the markets and industries, we find the same two conclusions. First, an asymmetric GARCH specification is essential when forecasting the 95% value-at-risk. Second, for both the 95% and 99% value-at-risk, it is crucial that the innovations' distribution is fat-tailed (e.g. Student-t or-even better-a nonparametric kernel density estimate).
AB - Various GARCH models are applied to daily returns of more than 1200 constituents of major stock indices worldwide. The value-at-risk forecast performance is investigated for different markets and industries, considering the test for correct conditional coverage using the false discovery rate (FDR) methodology. For most of the markets and industries, we find the same two conclusions. First, an asymmetric GARCH specification is essential when forecasting the 95% value-at-risk. Second, for both the 95% and 99% value-at-risk, it is crucial that the innovations' distribution is fat-tailed (e.g. Student-t or-even better-a nonparametric kernel density estimate).
KW - equity
KW - false discovery rate
KW - GARCH
KW - value-at-risk
KW - worldwide
UR - http://www.scopus.com/inward/record.url?scp=84880030136&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84880030136&partnerID=8YFLogxK
U2 - 10.1080/13504851.2013.806775
DO - 10.1080/13504851.2013.806775
M3 - Article
AN - SCOPUS:84880030136
SN - 1350-4851
VL - 20
SP - 1333
EP - 1339
JO - Applied Economics Letters
JF - Applied Economics Letters
IS - 14
ER -