Using Value at Risk Models for Decision Fundamentation on Central and Eastern Europe Stock Markets

摘要

In order to fundament their investment decision, investors analyze the volatility of the financial titles by a variety of methods. One of the most used methodology is Value at Risk which expresses the maximum loss of a portfolio at a given confidence level [1]. Its accuracy depends crucially on the models used to estimate it. Through this paper we want to emphasize the importance of using VaR models more sensitive to extreme events. We have analyzed five stock market indices from Central and Eastern Europe countries through Historical Simulation, EWMA, GARCH and EVT models demonstrating the strengths and weaknesses of each of them in the investment decision process.