Journal article
Downside risk and portfolio diversification in the euro-zone equity markets with special consideration of the crisis period
Journal of international money and finance, v 44, pp 47-68
Jun 2014
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This study examines the Value-at-Risk for ten euro-zone equity markets individually and also divided into two groups: PIIGS (Portugal, Italy, Ireland, Greece and Spain) and the Core (Austria, Finland, France, Germany and the Netherlands), employing four VaR estimation and evaluation methods considered over the full period and the pre- and post-global crisis subperiods 1 and 2. The backtesting results are also evaluated according to the Basel capital requirements. The results demonstrate that the CEVT methods meet all the statistical criteria the best for most individual equity indices over the full period, but these results over the two subperiods for those two methods are mixed, compared to those the DPOT methods. Moreover, the two optimal group portfolios of the PIIGS and the Core as well as the grand portfolio that combines the ten indices do not show much diversification benefits. The PIIGS portfolio selects Spain's IBEX only, while that of the Core opts for Austria's ATX only in the full period and subperiod 1. However, Germany's DAX overwhelmingly dominates both the Core and the Grand portfolios in subperiod 2.
•We examine Value-at-Risk for ten euro-zone equity markets into two groups.•CEVT methods meet all statistical criteria best for most indices over full period.•PIIGS portfolio selects Spain's IBEX only, while the Core opts for Austria's ATX.•Germany's DAX overwhelmingly dominates the Core and Grand portfolios in subperiod 2.
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Details
- Title
- Downside risk and portfolio diversification in the euro-zone equity markets with special consideration of the crisis period
- Creators
- Tengdong Liu - Tengdong Liu, School of Securities and Futures, SWUFE, Chengdu, ChinaShawkat Hammoudeh - Drexel UniversityPaulo Araújo Santos - School of Management and Technology of Santarém, Center of Statistics and Applications, University of Lisbon, Santarém, Portugal
- Publication Details
- Journal of international money and finance, v 44, pp 47-68
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000335617200003
- Scopus ID
- 2-s2.0-84894647620
- Other Identifier
- 991019167823104721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance