Tail Risk Of Asian Markets: An Extreme Value Theory Approach

This paper aims to draw inference about the tail behaviour of different markets through the fitted parameters of a GARCH-EVT model, with an emphasis on Asian markets. The empirical results indicate that the tail thickness is time-varying but there is no regional structure in the tail risk across the different regions. The comparison of the in-sample and out-of-sample tail risk measures, however, reveals higher tail risk for Asian markets indicating that the key difference over the long run is in the levels of volatility rather than in the residual tail thickness. Our findings highlight the importance of volatility modelling for tail risk estimation in the time domain and across regions.