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EMPIRICAL ESTIMATION AND COMPARISON OF NORMAL AND STUDENT T LINEAR VaR ON THE BELGRADE STOCK EXCHANGE
Abstract:
In this paper we describe theoretical and empirical linear VaR for the cases where the stock portfolio returns and the risk factor returns are generated by normal and Student t distribution. The main aim of this study is to show the effect that leptokurtosis has on VaR estimate. Using the daily Belex 15 data from January 2011 to January 2014 we estimate 1-day Normal and Student t VaR for different significance levels. The results show that for low significance levels, the normal assumption can overestimate VaR if the return distribution is leptokurtic. On the other hand, for higher significance levels, the normal assumption can seriously underestimate VaR. In the case of Serbian stock market the Student t distribution produce VaR estimates that are more representative of historical behavior of Belex 15 than normal linear VaR.
CITATION:
IEEE format
Z. Jeremić, I. Terzić, “EMPIRICAL ESTIMATION AND COMPARISON OF NORMAL AND STUDENT T LINEAR VaR ON THE BELGRADE STOCK EXCHANGE,” in Sinteza 2014 - Impact of the Internet on Business Activities in Serbia and Worldwide, Belgrade, Singidunum University, Serbia, 2014, pp. 298-302. doi:10.15308/sinteza-2014-298-302
APA format
Jeremić, Z., Terzić, I. (2014). EMPIRICAL ESTIMATION AND COMPARISON OF NORMAL AND STUDENT T LINEAR VaR ON THE BELGRADE STOCK EXCHANGE. Paper presented at Sinteza 2014 - Impact of the Internet on Business Activities in Serbia and Worldwide. doi:10.15308/sinteza-2014-298-302
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