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…
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.
Details
Keywords
Athanasios Koulakiotis, Dimitrios Angelidis, Konstantinos Tolikas and Phil Molyneux
This paper develops the approach suggested by Howe et al. to examine the impact of cross‐listings on stock price volatility in Europe.
Abstract
Purpose
This paper develops the approach suggested by Howe et al. to examine the impact of cross‐listings on stock price volatility in Europe.
Design/methodology/approach
A modified generalized autoregressive conditional hetero‐skedasticity (GARCH) modeling approach as suggested by Li and Engle is used taking into account different regulatory structures across the range of markets using LaPorta et al.'s stock market regulatory classification.
Findings
It is found that information spillover effects are important for the Dutch market for cross‐listed equities and that a different regulatory environment may have a noteworthy impact on symmetric information spillovers.
Research limitations/implications
The focus is 11 cross‐listing equities and on an event window of 12 years. This implies that the results may be biased on the data sample and the length of the period that used.
Practical implications
The findings are important for the shareholders of cross‐listed companies as the various impacts of regulatory differences between markets (as a result of low and high shareholder protection rules) from foreign markets to the Dutch home market are identified.
Originality/value
A primary focus of this paper is to provide a different methodology than the one adopted by Howe et al. using a modified GARCH modeling approach as suggested by Li and Engle, to examine the impact of the cross‐listings of Dutch firms on symmetric volatility spillovers. The analysis also takes into account the influence of different regulatory structures across the range of markets where Dutch firms are cross‐listed. In particular, we use LaPorta et al.'s stock market regulatory classification is used to analyze the magnitude and persistence of symmetric volatility spillovers from the foreign listing to the home equity of cross‐listed companies in the Dutch stock exchange.