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Selecting
Value-at-Risk Models for Government of India Fixed Income
Securities
-- G
P Samanta and Golaka C Nath
This
paper has evaluated a number of available VaR models, such
as, variance-covariance/normal (including Risk-Metric approach),
historical simulation and tail-index (Hill's estimator) based
method for estimating VaR for a number of selected GOI bonds
and representative portfolios of GOI bonds for banks and PDs.
Competing VaR methods/strategies are evaluated through backtesting
and assessment of two typical loss-functions. Empirical results
we present are quite interesting. It is seen that normal methods
(including Risk-Metric approach) generally underestimate VaRs.
On the other hand, VaR models based on HS and tail-index (using
Hill's estimator) are quite good, though the later produces
slightly more conservative VaR estimates. But when we look
at the loss-functions, tail-index method appears to give the
least magnitude/amount of excess loss (i.e., loss over estimated
VaR). These results, however, are tentative. One needs to
experiment with alternative sizes of rolling sample to check
the robustness of the results. Future research may also investigate
on appropriate formulation of loss-function while evaluating
VaR models.
©
2004, The IUP Journal of APPLIED FINANCE
Non-linearity
in Financial Markets: Evidence From Asean-5 Exchange Rates
and Stock Markets
-- Kian-Ping Lim and Venus Khim-Sen Liew
This
study found strong evidence for the presence of non-linearity
in all the ASEAN-5 exchange rates and stock returns series
based on the Hinich bispectrum test (Hinich, 1982) and Lukkonen-Saikkonen-Teräsvirta
linearity test (Luukkonen et al. 1988). As such, it is argued
that before any further empirical analysis, preliminary tests
should be conducted to examine the linearity nature of the
time series of ASEAN-5 financial market variables, as it is
no more appropriate to take linear assumption for granted.
©
2004, The IUP Journal of APPLIED FINANCE
Performance
of Mutual Funds in India: An
Empirical Evidence
-- Dr.
Subhash Chander and Dr. Jaspal Singh
For
the purpose of participating in the stock market, the people
who do not have the time or perhaps the expertise to take
direct investment decisions in equities successfully, the
option they have is to entrust the hard earned money to the
professionals who drive the mutual funds. The question, amidst
such a vague situation that looms large in the minds of the
investors is upon whom an average investor should rely. Or
else, what should be the criteria to distinguish better mutual
fund from the other, from investment point of view. The way
out available is to compare the performance shown by different
mutual funds that provides an edge to one fund over the other.
©
2004, The IUP Journal of APPLIED FINANCE
How
Kind are Strangers? Examining the Impact of Foreign Banks
on Domestic Bank Performance
-- Saibal Ghosh
In
many countries and especially in developing economies, the
presence of foreign banks has increased dramatically, particularly
during the 1990s. Such presence of foreign banks has raised
the question as to how does foreign bank presence impinge
on domestic profitability. The paper examines the issue in
the Indian context, examining, in particular, whether growing
presence of foreign banks improves or retards domestic bank
profitability. The analysis suggests that the income and cost-reducing
effects of foreign bank entry on domestic banking markets
take place only after the level of foreign bank entry reaches
a certain threshold, judged in terms of either numbers (of
foreign banks) or their market share.
©
2004, The IUP Journal of APPLIED FINANCE
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