Title: Risk-management criteria in the Latin-American stock markets: an assessment with a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry
Authors: Arturo Lorenzo-Valdés; Antonio Ruíz-Porras
Addresses: Department of Finance and Accounting, Universidad de las Américas Puebla, Santa Catarina Mártir, 72820, Cholula, Puebla, Mexico ' Department of Quantitative Methods, Universidad de Guadalajara CUCEA, Periférico Norte 799, Núcleo Universitario Los Belenes, 45100, Zapopan, Jalisco, Mexico
Abstract: We build a TGARCH model with a skewed normal distribution and autoregressive conditional asymmetry. We use the model for modelling series of stock-market returns and for investigating some risk-management criteria prevailing in the Latin-American stock markets. The main results support the usefulness of the model. Particularly, they suggest that hedging and diversification practices among the markets may be useful for risk-management purposes. Moreover, they suggest that the most risk-averse investors are in Argentina and the least risk-averse ones in Colombia. Furthermore, they imply that the behaviour of investors may be more complex than the one postulated by the mean-variance paradigm.
Keywords: stock markets; TGARCH model; skewed normal distribution; autoregressive conditional asymmetry; stock market returns; risk management; Latin America; modelling; risk-averse investors.
International Journal of Computational Economics and Econometrics, 2015 Vol.5 No.4, pp.430 - 450
Available online: 08 Oct 2015 *Full-text access for editors Access for subscribers Purchase this article Comment on this article