Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/178556
Authors: 
Mabitsela, Lesedi
Maré, Eben
Kufakunesu, Rodwell
Year of Publication: 
2015
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 8 [Year:] 2015 [Issue:] 1 [Pages:] 103-126
Abstract: 
The statistical distribution of financial returns plays a key role in evaluating Value-at-Risk using parametric methods. Traditionally, when evaluating parametric Value-at-Risk, the statistical distribution of the financial returns is assumed to be normally distributed. However, though simple to implement, the Normal distribution underestimates the kurtosis and skewness of the observed financial returns. This article focuses on the evaluation of the South African equity markets in a Value-at-Risk framework. Value-at-Risk is estimated on four equity stocks listed on the Johannesburg Stock Exchange, including the FTSE/JSE TOP40 index and the S & P 500 index. The statistical distribution of the financial returns is modelled using the Normal Inverse Gaussian and is compared to the financial returns modelled using the Normal, Skew t-distribution and Student t-distribution. We then estimate Value-at-Risk under the assumption that financial returns follow the Normal Inverse Gaussian, Normal, Skew t-distribution and Student t-distribution and backtesting was performed under each distribution assumption. The results of these distributions are compared and discussed.
Subjects: 
Value-at-Risk
Normal Inverse Gaussian (NIG)
FTSE/JSE TOP40 index
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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