Value at Risk Analysis and Investment Portfolio Optimization of Asian Stocks

Abstract

This study investigated the Value at Risk (VaR) and the Component Expected Shortfall (CES) to find an optimal investment portfolio considering the 15 Asian stock markets. The data is collected from 2006 to 2019, and then divided into three phases corresponding to the pre-crisis, during-crisis, and post-crisis periods of the 2008 Global Financial Crisis. Empirical results showed that the VaR increased from 0.0034 to 0.0062 (82.35%) during the crisis period but decreased from 0.0062 to 0.0035 (43.55%) after the crisis. Obviously, the crisis influenced the risk of stock markets in Asia. The results of portfolio analysis suggest that Malaysia stocks should have received the highest investment proportion during the crisis period with no investment proportion for Singapore, India, and Pakistan stocks. After the crisis, Indonesia stocks should constitute the highest investment proportion in the portfolio, while the investment in stock markets of Singapore, Turkey, and Russia is not suggested.