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Equity Risk Exposure: A Case of Indian Banking Industry

By: Contributor(s): Material type: TextTextDescription: 40-58 pSubject(s): In: MURTHY, E N APPLIED ECONOMICSSummary: Global market integration and increase in trading activities have magnified the financial system complexities and increased the degree of riskiness. Value-at-Risk (VaR) has been universally accepted as a measure of market risk in financial institutions. In this study, using the data of NSE-Nifty Bank Index and indices of SBI and ICICI Bank over a sample period from January 3, 2005 to November 19, 2014, an attempt has been made to analyze the market exposure in Indian banking industry by employing various methods of VaR. The study reveals that there is greater market turbulence during the financial crisis period than the pre- and post-crisis periods through all the three techniques of VaR. Moreover, bifurcating the full sample into three sub-samples (pre-crisis, crisis and post-crisis periods) seems to assure robustness, thereby validating the applicability of VaR methods for the Indian banking sector. Further, backtesting through Kupiec test revealed that historical simulation approach accounts for less statistical noise than other methods of estimating VaR.
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Item type Current library Call number Vol info Status Notes Date due Barcode Item holds
Journal Article Journal Article Main Library Vol 17, No 1/ 5558571JA3 (Browse shelf(Opens below)) Available 5558571JA3
Journals and Periodicals Journals and Periodicals Main Library On Display JOURNAL/ECO/Vol 17, No 1/5558571 (Browse shelf(Opens below)) Vol 17, No 1 (01/01/2018) Not for loan January, 2018 5558571
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Global market integration and increase in trading activities have magnified the financial system complexities and increased the degree of riskiness. Value-at-Risk (VaR) has been universally accepted as a measure of market risk in financial institutions. In this study, using the data of NSE-Nifty Bank Index and indices of SBI and ICICI Bank over a sample period from January 3, 2005 to November 19, 2014, an attempt has been made to analyze the market exposure in Indian banking industry by employing various methods of VaR. The study reveals that there is greater market turbulence during the financial crisis period than the pre- and post-crisis periods through all the three techniques of VaR. Moreover, bifurcating the full sample into three sub-samples (pre-crisis, crisis and post-crisis periods) seems to assure robustness, thereby validating the applicability of VaR methods for the Indian banking sector. Further, backtesting through Kupiec test revealed that historical simulation approach accounts for less statistical noise than other methods of estimating VaR.

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