The Gumbel Copula Method for Estimating Value at Risk: Evidence from Telecommunication Stocks in Indonesia during the COVID-19 Pandemic
Round 1
Reviewer 1 Report
This article is like a tutorial or an econometric exercise that teaches others how to conduct the Gumbel Copula Method. Its academic contribution is much lower than being a case study. Most information that the study presents can be found in text book, lacking originality. Some information like COVID-19, elecommunications stocks, introduction to Value at Risk (VaR), seem trivial and do not mean a lot in the study. Figures are clear but lack the information about X and Y axes, making it hard to understant the text. What the tables present are simple econometric tests. Tables 1 and 2 can be combined into a table, tables 5 and 6 can be combined into a table, while tables 7 and 8 can be combined into a table. Its findings may not be significant in the literature.
This article is like a tutorial or an econometric exercise that teaches others how to conduct the Gumbel Copula Method. Its academic contribution is much lower than being a case study. Most information that the study presents can be found in text book, lacking originality. Some information like COVID-19, elecommunications stocks, introduction to Value at Risk (VaR), seem trivial and do not mean a lot in the study. Figures are clear but lack the information about X and Y axes, making it hard to understant the text. What the tables present are simple econometric tests. Tables 1 and 2 can be combined into a table, tables 5 and 6 can be combined into a table, while tables 7 and 8 can be combined into a table. Its findings may not be significant in the literature.
Author Response
Dear Reviewer 1,
We would like to express our sincere gratitude for your valuable review of our paper, and we truly appreciate your insights. We have taken your feedback into careful consideration, and as per your suggestions, we have made the necessary technical improvements, as outlined in the comments. Furthermore, we have incorporated a comprehensive review of prior literature concerning the various methods used to estimate Value at Risk (VaR).
This addition enriches our research by providing a thorough understanding of one of the relevant VaR estimation methods, particularly when dealing with non-normally distributed data. We once again extend our gratitude for your review of our paper, and we remain open to receiving any further suggestions and critiques related to the development of this manuscript, with the aim of making a more substantial contribution to the existing literature.
Yours sincerely,
[Authors]
Reviewer 2 Report
The paper should be improved before publication. The fundamental issue is the reason for choosing the Gumbel copula among a large spectrum of copulas. It seems to me that the choice of Gumbel copula is based solely on convenience due to its simplistic form. When we use copulas in option pricing, we choose Lévy copulas to avoid arbitrage opportunities. When dealing with optimal portfolio and risk analysis, we use asymmetric copulas, as the returns and tail dependencies are asymmetric. I would like to see the results recomputed for asymmetric copulas [1],[2], and to avoid model bias, for empirical copulas [3].
References: [1] Eckhard Liebscher, Construction of asymmetric multivariate copulas, Journal of Multivariate Analysis, Volume 99, Issue 10, 2008, Pages 2234-2250, ISSN 0047-259X, https://doi.org/10.1016/j.jmva.2008.02.025.
[2] Shogo Kato1 · Toshinao Yoshiba2 · Shinto Eguchi, Copula-based measures of asymmetry between the lower and upper tail probabilities, Statistical Papers (2022) 63:1907–1929, https://doi.org/10.1007/s00362-022-01297-w.
[3] https://cran.r-project.org/web/packages/copula/vignettes/empirical_copulas.html
Author Response
Dear Reviewer 2,
We extend our sincere appreciation for your thorough review of our paper, and we highly value your constructive feedback for the further development of our article. In response to your recommendations, we have diligently addressed the technical improvements as outlined in the comments. Additionally, we have augmented our manuscript with a comprehensive review of prior literature pertaining to various approaches in estimating Value at Risk (VaR).
This addition significantly enhances our research by providing valuable insights into one of the pertinent VaR estimation methods, especially when confronted with non-normally distributed data. Regarding your suggestion to request a reevaluation of asymmetric copulas and empirical copulas, we acknowledge your point and understand the need for justification concerning their comparison with the Gumbel copula. We emphasize that the strength of our chosen estimation method lies in its applicability to non-normally distributed data, as previously elucidated in the introduction. Furthermore, it is worth noting that the Gumbel copula falls within the category of asymmetric copulas. To conduct a meaningful comparison, we would greatly appreciate your guidance on specific methodologies that warrant consideration.
Once again, we express our gratitude for your diligent review of our paper, and we remain receptive to further suggestions and critiques related to the advancement of this manuscript, with the aim of making a more substantial contribution to the existing literature.
Yours sincerely,
[Authors]
Round 2
Reviewer 1 Report
This revised manuscript is better now. The authors did their best to improve this study. One suggestion: can the authors provide data and source code to examine the results?
No problem with the Quality of English.
Author Response
Dear Reviewer 1,
We express our gratitude for the insightful review of our paper. In response to your recent suggestion, we would like to clarify that this matter has been addressed in section 3 (results), specifically in the first paragraph. Furthermore, the data access used for estimation is open, and the analytical tool RStudio is open access, allowing for scrutiny by the wider community. The paragraph in question is as follows:
"
This research exclusively utilizes secondary data in the form of daily stock investment closing prices denominated in Indonesian Rupiah. These data were meticulously extracted from http://finance.yahoo.com and specifically consist of historical records pertaining to the performance of PT. Indosat Ooredoo Hutchison, tbk, and PT. Smartfren Telecom, tbk, spanning the timeframe between March 11, 2019, and March 10, 2020. To facilitate the comprehensive analysis of this data, the research was conducted employing RStudio software, specifically Version 3.6.3, encompassing a total dataset comprising 257 data points."
Author Response File: 
Author Response.docx
Reviewer 2 Report
I recommend the publication of the paper in its present (revised) form. The authors have done considerable work on revising the paper, and the paper has improved considerably, warranting its publication.
Author Response
Dear Reviewer 2,
We extend our gratitude for your valuable review of our paper, which allows us to further enhance its quality. We hope that this research will make a significant contribution to both the academic literature and practical applications.
