Measuring the Financial Risk Level in Emerging and Developed Markets: Traditional and Alternative Methods

  •  Samet Günay    


In this study, we measured the financial risk levels of five emerging and five developed markets’ stock indexes using traditional and alternative models. We used the variance, semi-variance, beta, and downside beta, Gaussian VaR, Historical VaR and Cornish-Fisher VaR as the traditional methods; and took the two parameters of the alpha-stable distributions (alpha and beta) and the excess statistic introduced by Harding and Pagan (2002) as alternative models. According to the findings, traditional and alternative models, except for the beta, downside beta, and the excess statistic, gave consistent results in terms of the risk classification between the emerging and the developed markets. Additionally, all models affirmed that the highest risk exists in the stock index of Turkey, whereas the USA stock market has the lowest risk level among the countries analyzed.

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