RISK EVALUATION IN THE BALTIC STOCK MARKET
Journal Title: Jaunųjų mokslininkų darbai - Year 2014, Vol 42, Issue 2
Abstract
Investment into the stocks is concurrent with risk. When investing, it is necessary to know the type of risk and its level. The problem of risk evaluation is relevant among Lithuanian and foreign researchers. H. Markowitz presented the definition of the efficient portfolio, where the aspects of profitability and risk management are considered. H. Markowitz, as well as the other researchers, uses standard deviation to evaluate risk. W. Sharpe in addition offered to assess market risk, which is evaluated by the beta coefficient. The researchers in the different markets and situations studied the beta coefficient relation with profitability; however, they did not arrive at one particular answer. During the last decade the risk value method was taken up and investigated by many foreign researchers. Other authors used different methods to evaluate risk: CVR (Conditional Value at Risk), GMD (Gini’s Mean Difference), MAD (Mean Absolute Deviation), etc. The empirical risk evaluation research in the NASDAQ OMX Baltic stock exchange in period from 2013 01 01 – 2013 12 31 showed that historical data used to evaluate risk provides similar results independent from the applied method. When the interval of reliance increases, the risk value also increases. Portfolio formation reduced systematic and unsystematic risk, but the correlation of the portfolio profitability with the index remained high. Due to the market uncertainty the past data does not always reflect present and forecast risk; therefore, the methods of risk evaluation, which require the historical data to be used, is better applied in combination with other risk evaluation methods and indexes. Key words: value at risk, historical simulation, standard deviation, beta coefficient.
Authors and Affiliations
Martynas Brazauskas
Keywords
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