Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?

Our objective in this article was to verify which models for the Value at Risk (VaR), among those that do not consider conditional volatility (Extreme Values Theory and the traditional Historical Simulation), and those that do consider it (GARCH and IGARCH), are adequate for the main index of the Br...

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Autores principales:	Luiz Augusto Finger França Maluf, Jéssica Tamy Asano
Formato:	article
Lenguaje:	EN PT
Publicado:	FUCAPE Business School 2019
Materias:	value at risk clusters of violations ibovespa Business HF5001-6182
Acceso en línea:	https://doaj.org/article/9946750b8b8a4ceca6854b94f529e5e8
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spelling	oai:doaj.org-article:9946750b8b8a4ceca6854b94f529e5e82021-11-11T15:48:08ZComparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?1807-734X10.15728/bbr.2019.16.6.6https://doaj.org/article/9946750b8b8a4ceca6854b94f529e5e82019-01-01T00:00:00Zhttp://www.redalyc.org/articulo.oa?id=123062339006https://doaj.org/toc/1807-734XOur objective in this article was to verify which models for the Value at Risk (VaR), among those that do not consider conditional volatility (Extreme Values Theory and the traditional Historical Simulation), and those that do consider it (GARCH and IGARCH), are adequate for the main index of the Brazilian stock market, the IBOVESPA. For this purpose, backtesting of adherence and the independence of first and higher orders were implemented for the four models mentioned, over forecast horizons of 1 and 10 days. The contribution is based on a the more rigorous criteria than those used in the literature for validating VaR models, as we performed backtesting for violation independence of higher orders on forecast horizons of 10 days. The results show that only GARCH family models were adequate. Thus, it is recommended to entities of the National Financial System that keep relevant positions in the Brazilian stock market, the utilization of internal risk models based on conditional volatility, in order to minimize the occurrence of violation clusters.Luiz Augusto Finger França MalufJéssica Tamy AsanoFUCAPE Business Schoolarticlevalue at riskclusters of violationsibovespaBusinessHF5001-6182ENPTBBR: Brazilian Business Review, Vol 16, Iss 6, Pp 626-645 (2019)
institution	DOAJ
collection	DOAJ
language	EN PT
topic	value at risk clusters of violations ibovespa Business HF5001-6182
spellingShingle	value at risk clusters of violations ibovespa Business HF5001-6182 Luiz Augusto Finger França Maluf Jéssica Tamy Asano Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
description	Our objective in this article was to verify which models for the Value at Risk (VaR), among those that do not consider conditional volatility (Extreme Values Theory and the traditional Historical Simulation), and those that do consider it (GARCH and IGARCH), are adequate for the main index of the Brazilian stock market, the IBOVESPA. For this purpose, backtesting of adherence and the independence of first and higher orders were implemented for the four models mentioned, over forecast horizons of 1 and 10 days. The contribution is based on a the more rigorous criteria than those used in the literature for validating VaR models, as we performed backtesting for violation independence of higher orders on forecast horizons of 10 days. The results show that only GARCH family models were adequate. Thus, it is recommended to entities of the National Financial System that keep relevant positions in the Brazilian stock market, the utilization of internal risk models based on conditional volatility, in order to minimize the occurrence of violation clusters.
format	article
author	Luiz Augusto Finger França Maluf Jéssica Tamy Asano
author_facet	Luiz Augusto Finger França Maluf Jéssica Tamy Asano
author_sort	Luiz Augusto Finger França Maluf
title	Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
title_short	Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
title_full	Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
title_fullStr	Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
title_full_unstemmed	Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?
title_sort	comparison of var models to the brazilian stock market under the hypothesis of serial independence in higher orders: are garch models really indispensable?
publisher	FUCAPE Business School
publishDate	2019
url	https://doaj.org/article/9946750b8b8a4ceca6854b94f529e5e8
work_keys_str_mv	AT luizaugustofingerfrancamaluf comparisonofvarmodelstothebrazilianstockmarketunderthehypothesisofserialindependenceinhigherordersaregarchmodelsreallyindispensable AT jessicatamyasano comparisonofvarmodelstothebrazilianstockmarketunderthehypothesisofserialindependenceinhigherordersaregarchmodelsreallyindispensable
_version_	1718433906129108992

Comparison of VaR Models to the Brazilian Stock Market Under the Hypothesis of Serial Independence in Higher Orders: Are Garch Models Really Indispensable?

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