The rare event risk in African emerging stock markets
Abstract
Purpose
The purpose of this paper is to investigate the asymptotic distribution of the extreme daily stock returns in African stock markets over the period 1996‐2007 and examine the implications for downside risk measurement.
Design/methodology/approach
Extreme value theory methods are used to model adequately the extreme minimum daily returns in a number of African emerging stock markets.
Findings
The empirical results indicate that the generalised logistic distribution best fitted the empirical data over the period of study.
Practical implications
Using the generalised extreme value and normal distributions for risk assessment could lead to an underestimation of the likelihood of extreme share price declines which could potentially lead to inadequate protection against catastrophic losses.
Originality/value
To the best of the author's knowledge, this is the first study to examine the lower tail distribution of daily returns for African emerging stock markets.
Keywords
Citation
Tolikas, K. (2011), "The rare event risk in African emerging stock markets", Managerial Finance, Vol. 37 No. 3, pp. 275-294. https://doi.org/10.1108/03074351111113324
Publisher
:Emerald Group Publishing Limited
Copyright © 2011, Emerald Group Publishing Limited