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Market risk of developed and developing countries during the global financial crisis

By Bülent Köksal and Mehmet Orhan

Abstract

This study compares the performance of the widely used risk measure Value-at-Risk (VaR) across a large sample of developed and developing countries. The performance of the VaR is assessed by both unconditional and conditional tests of Kupiec and Christoffersen, respectively, as well as the Quadratic Loss Function. Results indicate that the performance of VaR as a measure of risk is much worse for developed countries than the developing ones during our sample period. One possible reason might be the deeper initial impact of global financial crisis on developed countries than emerging markets. Results also provide evidence of decoupling between emerging and developed countries in terms of market risk during the global financial crisis.

Topics: C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models, C51 - Model Construction and Estimation, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, G01 - Financial Crises
Year: 2012
DOI identifier: 10.2139/ssrn.2026781
OAI identifier: oai:mpra.ub.uni-muenchen.de:37523

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