MEASURING RISK MODELS' EFFICIENCY: THE CASE FOR THE MALAYSIA MARKET
The intention of this paper is to determine the most efficient risk model which can be implemented in diverse business sectors of an economy. The methodology involved using Value-at-Risk (VaR) technique with the integration of GARCH-based representation on three selected non-financial sectors in Malaysia. Using time-series data from 1993 until 2010, the efficiency test namely the Mean Relative Scaled Bias (MRSB) is then conducted. The evidence showed that the VaR forecast integrated with t-distribution GARCH has better capabilities to track movements in true risk exposures thus suggesting it as the most efficient model within specific assumptions and constraints.
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