Stress Testing and Risk Management of the Equity Market in New Zealand

Stress Testing and Risk Management of the Equity Market in New Zealand

Andrew Maree

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Reserve Bank of New Zealand

Stress Testing and Risk Management of the Equity Market in New Zealand

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Abstract

The banking supervision sets out the need to conduct stress tests for the financial institutions in New Zealand. For the purpose of stress tests, the paper develops a methodology to calculate a series of severe but plausible economic scenarios. Five widely-used statistical distributions are investigated in fitting the return series of NZ 50. We show that the Skewed t distribution has the best goodness of fit and generates the most suitable stress test scenarios. Our approach could be an important component of sound risk management for the Reserve Bank of New Zealand. The financial institutions are expected to continue to develop their stress testing frameworks, and to use the results in our paper to inform their capital management and risk appetite setting processes.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Andrew Maree. 2017. \u201cStress Testing and Risk Management of the Equity Market in New Zealand\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 17 (GJMBR Volume 17 Issue B4).

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GJMBR Volume 17 Issue B4

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

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Classification

GJMBR-B Classification JEL Code: C46; C58; G10

Submission ReceivedDecember 9, 2016
Peer Review Double Blind
Handling Editor
Accepted January 1, 2017
Published January 15, 2017

Version of record

v1.2

Issue date

September 23, 2017

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Article Matrices

Total Score: 121

Country: New Zealand

Subject: Global Journal of Management and Business Research - B: Economic & Commerce

Authors: Andrew Maree (PhD/Dr. count: 0)

View Count (all-time): 200

Total Views (Real + Logic): 3567

Total Downloads (simulated): 1773

Publish Date: 2017 09, Sat

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Total Views: 3567

Total Downloads: 1773

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