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

Andrew Maree

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

Andrew Maree * §

Contact

Reserve Bank of New Zealand

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

Article Fingerprint

ReserarchID

MBR8SOV1

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

Key Research Insights

Synthesized scholarly intelligence & interactive research assistant

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.

References

22 Cites in Article

Reference Format

H Akaike (1973). Information theory and an extension of the maximum likelihood principle.
O Barndorff-Nielsen (1977). Exponentially decreasing distributions for the logarithm of particle size.
Bcbs (2011). Basel III: international regulatory framework for banks.
Thomas Breuer,Martin Jandacka,Klaus Rheinberger,Martin Summer (2009). Macroeconomic Stress and Worst Case Analysis of Loan Portfolios.
Daniel Choi,Victor Fang,Tian Fu (2009). Volatility spillovers between New Zealand stock market returns and exchange rate changes before and after the 1997 Asian financial crisis.
Olivier Darné,Guy Levy-Rueff,Adrian Pop (2013). Calibrating Initial Shocks in Bank Stress Test Scenarios: An Outlier Detection Based Approach.
José Figueroa‐lópez,Steven Lancette,Kiseop Lee,Yanhui Mi (2011). Estimation of NIG and VG Models for High Frequency Financial Data.
M Firth (1997). An analysis of the stock market performance of new issues in New Zealand.
Mark Flood,George Korenko (2014). Systematic scenario selection: stress testing and the nature of uncertainty.
P Glasserman,C Kang,W Kang (2014). Stress scenario selection by empirical likelihood.
Zi-Yi Guo (2017). Heavy-Tailed Distributions and Risk Management of Equity Market Tail Events.
Bruce Hansen (1994). Autoregressive Conditional Density Estimation.
D Hargreaves,G Williamson (2011). Stress testing New Zealand Banks' dairy portfolios.
C Huber-Carol,N Balakrishnan,M Nikulin,M Mesbah (2002). Goodness-of-Fit Tests and Model Validity.
Imf (2017). Stress testing the banking sector and systemic risk analysis on New Zealand -technical note.
B Jang,M Kataoka (2013). New Zealand Banks' vulnerabilities and capital adequacy.
Pavel Kapinos,Oscar Mitnik (2016). A Top-down Approach to Stress-testing Banks.
B Mandelbrot (1963). New methods in statistical economics.
K Prause (1999). The generalized hyperbolic model: estimation, financial derivatives, and risk measures.
Adam Gorajek,Joel Bank,Andrew Staib,Benjamin Malin,Hamish Fitchett (2015). Star Wars at Central Banks.
D Taeger,S Kuhnt (2014). Goodness-of-fit tests.
D Zhu,J Galbraith (2012). A generalized asymmetric Student-t distribution with application to financial econometrics.

Download References

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. "Stress Testing and Risk Management of the Equity Market in New Zealand". Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 17 (GJMBR Volume 17 Issue B4).

More Citation Formats

Select Citation Style:

Download Citation

GJMBR Volume 17 Issue B4

Explore Journals Explore Volume Read This Issue

Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Not Found

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

Language

English

Experiance in AR

Explore published articles in an immersive Augmented Reality environment. Our platform converts research papers into interactive 3D books, allowing readers to view and interact with content using AR and VR compatible devices.

View in VR

Read in 3D

Your published article is automatically converted into a realistic 3D book. Flip through pages and read research papers in a more engaging and interactive format.

View in 3D

Article Matrices

Total Score: 168

Country: New Zealand

Subject: Global Journal of Management and Business Research

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

View Count (all-time): 306

Total Views (Real + Logic): 1094

Total Downloads (simulated): 49

Publish Date: 2017 01, Sun

Monthly Totals (Real + Logic):

Month 1: 63 views
Month 2: 24 views
Month 3: 67 views
Month 4: 36 views
Month 5: 42 views
Month 6: 35 views
Month 7: 29 views
Month 8: 47 views
Month 9: 36 views
Month 10: 41 views
Month 11: 46 views
Month 12: 17 views
Month 13: 32 views
Month 14: 30 views
Month 15: 38 views
Month 16: 50 views
Month 17: 19 views
Month 18: 35 views
Month 19: 17 views
Month 20: 39 views
Month 21: 19 views
Month 22: 21 views
Month 23: 33 views
Month 24: 31 views
Month 25: 24 views
Month 26: 19 views
Month 27: 26 views
Month 28: 30 views
Month 29: 32 views
Month 30: 31 views
Month 31: 38 views
Month 32: 35 views
Month 33: 30 views
Month 34: 33 views
Month 35: 16 views
Month 36: 24 views
Month 37: 32 views
Month 38: 27 views
Month 39: 33 views
Month 40: 40 views
Month 41: 38 views
Month 42: 31 views
Month 43: 17 views
Month 44: 30 views
Month 45: 44 views
Month 46: 46 views
Month 47: 21 views
Month 48: 28 views
Month 49: 24 views
Month 50: 42 views
Month 51: 43 views
Month 52: 25 views
Month 53: 40 views
Month 54: 20 views
Month 55: 45 views
Month 56: 36 views
Month 57: 36 views
Month 58: 26 views
Month 59: 32 views
Month 60: 31 views
Month 61: 47 views
Month 62: 32 views
Month 63: 45 views
Month 64: 17 views
Month 65: 24 views
Month 66: 27 views
Month 67: 44 views
Month 68: 34 views
Month 69: 24 views
Month 70: 36 views
Month 71: 36 views
Month 72: 41 views
Month 73: 24 views
Month 74: 22 views
Month 75: 36 views
Month 76: 22 views
Month 77: 38 views
Month 78: 40 views
Month 79: 40 views
Month 80: 24 views
Month 81: 18 views
Month 82: 33 views
Month 83: 47 views
Month 84: 34 views
Month 85: 21 views
Month 86: 31 views
Month 87: 39 views
Month 88: 33 views
Month 89: 30 views
Month 90: 15 views
Month 91: 29 views
Month 92: 34 views
Month 93: 38 views
Month 94: 46 views
Month 95: 38 views
Month 96: 36 views
Month 97: 44 views
Month 98: 37 views
Month 99: 31 views
Month 100: 25 views
Month 101: 27 views
Month 102: 61 views
Month 103: 46 views
Month 104: 29 views
Month 105: 39 views
Month 106: 46 views
Month 107: 38 views
Month 108: 34 views
Month 109: 33 views
Month 110: 25 views
Month 111: 35 views
Month 112: 32 views
Month 113: 27 views
Month 114: 21 views
Month 115: 54 views
Month 116: 40 views
Month 117: 24 views

Total Views: 1.1K

Total Downloads: 49

All Trends