The Role of Trading Volume in Forecasting Market RiskReport as inadecuate




The Role of Trading Volume in Forecasting Market Risk - Download this document for free, or read online. Document in PDF available to download.

This paper examines the information content of trading volume in terms of forecasting the conditional volatility and market risk of international stock markets. The performance of parametric Value at Risk VaR models including the traditional RiskMetrics model and a heavy-tailed EGARCH model with and without trading volume is investigated during crisis and post-crisis periods. Our empirical results provide compelling evidence that volatility forecasts based on volume-augmented models cannot be outperformed by their competitors. Furthermore, our findings indicate that including trading volume into the volatility specification greatly enhances the performance of the proposed VaR models, especially during the crisis period. However, the volume effect is fairly overshadowed by the sufficient accuracy of the heavy-tailed EGARCH model, during the post-crisis period.

KEYWORDS

Value at Risk, Risk Management, Trading Volume, EGARCH Model

Cite this paper

Slim, S. 2016 The Role of Trading Volume in Forecasting Market Risk. Journal of Financial Risk Management, 5, 22-34. doi: 10.4236-jfrm.2016.51004.





Author: Skander Slim

Source: http://www.scirp.org/



DOWNLOAD PDF




Related documents