Causal dependency in extreme returns

Krzysztof Echaust

Abstract

Modelling of extreme price movements is one of the greatest challenges to risk managers. Extreme Value Theory provides useful and natural tools to analyze a distribution of such events but they are unable to predict the future behavior of extreme returns and their consequences. On the other hand we know that the sequence of extrema behavior, similar to volatility, exhibits long term memory. We have foundnew property of that sequence on the capital markets, what could be useful in construction of a predictive model of extrema. We argue that in the blocks of returns shorter than quarterly, returns maxima cause minima but it is not a common inverse causal dependency.
Author Krzysztof Echaust (WIiGE / KBO)
Krzysztof Echaust,,
- Department of Operations Research
Pages 102-113
Publication size in sheets0.55
Book Jedlička Pavel (eds.): Hradec Economic Days. Double-blind peer-reviewed proceedings part IV. of the International Scientific Conference Hradec Economic Days 2015, Hradec Economic Days, vol. 5, no. 4, 2015, University of Hradec Králové, ISBN 978-80-7435-549-3, 375 p.
Keywords in Englishextreme returns, cross-correlation, Granger causality, extreme value theory
Languageen angielski
Score (nominal)15
Score sourceconferenceIndex
ScoreMinisterial score = 15.0, 12-02-2020, BookChapterSeriesAndMatConfByIndicator
Ministerial score (2013-2016) = 15.0, 12-02-2020, BookChapterSeriesAndMatConfByIndicator
Publication indicators WoS Citations = 0
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