The possibilities of application of the parametric and nonparametric VaR daily returns estimation – Regional perspective

Abstract

© 2017, Kauno Technologijos Universitetas. All rights reserved. The subject of this research is to test the performances of the parametric and nonparametric VaR models in the markets of the countries of the Southeast European region. The research objective is to provide concrete results regarding the possibilities of application of aforementioned VaR models in the observed markets. The research hypothesis is that the application of both parametric and nonparametric VaR models can provide optimal results regarding investment optimization. The methodology used in this research includes the application of MANOVA analysis, discriminant analysis, and Roy's test in the case of selected regional countries. The research results indicate the significance of the analysed VaR models application in the analysed markets and expand the potential for further research in the subject field. The results obtained in the research (rolling windows 100 and 300 days) implicate that statistically significant differences exists in the application of both parametric and nonparametric VaR models. Also, these results have significant international importance having in mind that there are very few studies in this area with the focus on the markets of the Southeast European region, especially with so wide and systemic approach as in this research. Having this fact in mind, the results obtained in this research significantly expand both academic and practical knowledge about possibilities and limitations of different Value at Risk models in everyday business practice.