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Value-at-Risk (VAR) Estimation Methods: Empirical Analysis based on BRICS Markets

Ben Salem, Ameni and Safer, Imene and Khefacha, Islem (2022): Value-at-Risk (VAR) Estimation Methods: Empirical Analysis based on BRICS Markets.

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The purpose of this paper is to investigate some statistical methods to estimate the value-at-Risk (VaR) for stock returns in the BRICS countries for the period between 2011 to 2018. Four different risk methods are used to estimate VaR: Historical Simulation (HS), Riskmetrics, Historical Method and Generalized Autoregressive Conditional Heteroscedasticity (GARCH) Process. By applying the Backtesting technique, we try to test the effectiveness of this different methods by comparing the calculated VaR with the real realized losses (or gain) of the portfolio or the index. The results show that for the all-BRICS countries and at different confidence level; the Historical Method and the Historical Simulation are the appropriate methods. While the GARCH model failed to predict precisely the VaR for all BRICS countries.

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