Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103611
Authors: 
Aboura, Sofiane
Year of Publication: 
2014
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Publisher:] MDPI [Place:] Basel [Volume:] 2 [Year:] 2014 [Issue:] 2 [Pages:] 211-225
Abstract: 
Over the last three decades, the world economy has been facing stock market crashes, currency crisis, the dot-com and real estate bubble burst, credit crunch and banking panics. As a response, extreme value theory (EVT) provides a set of ready-made approaches to risk management analysis. However, EVT is usually applied to standardized returns to offer more reliable results, but remains difficult to interpret in the real world. This paper proposes a quantile regression to transform standardized returns into theoretical raw returns making them economically interpretable. An empirical test is carried out on the S&P500 stock index from 1950 to 2013. The main results indicate that the U.S stock market becomes extreme from a price variation of ±1.5% and the largest one-day decline of the 2007 - 2008 period is likely, on average, to be exceeded one every 27 years.
Subjects: 
extreme value theory
volatility
risk management
JEL: 
C4
G13
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
Appears in Collections:

Files in This Item:
File
Size
484.93 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.