Predictive Ability Of Value-At-Risk Methods: Evidence From The Karachi Stock Exchange-100 Index
Value-at-Risk (VaR) is a useful risk measure broadly used by financial institutions all over the world. VaR has been extensively used to measure systematic risk exposure in developed markets like of the US, Europe and Asia. This paper analyzes the accuracy of VaR measure for Pakistan's emerging stock market using daily data from the Karachi Stock Exchange-100 index January 1992 to June 2008. The authors computed VaR by employing data on annual basis as well as for the whole 17 year period. Overall they found that VaR measures are more accurate when KSE index return volatility is estimated by GARCH (1,1) model especially at 95% confidence level.