*Article* **Value-at-Risk for South-East Asian Stock Markets: Stochastic Volatility vs. GARCH**

### **Paul Bui Quang 1, Tony Klein 2,3, Nam H. Nguyen 1 and Thomas Walther 3,4,\***


Received: 16 March 2018; Accepted: 3 April 2018; Published: 5 April 2018

**Abstract:** This study compares the performance of several methods to calculate the Value-at-Risk of the six main ASEAN stock markets. We use filtered historical simulations, GARCH models, and stochastic volatility models. The out-of-sample performance is analyzed by various backtesting procedures. We find that simpler models fail to produce sufficient Value-at-Risk forecasts, which appears to stem from several econometric properties of the return distributions. With stochastic volatility models, we obtain better Value-at-Risk forecasts compared to GARCH. The quality varies over forecasting horizons and across markets. This indicates that, despite a regional proximity and homogeneity of the markets, index volatilities are driven by different factors.

**Keywords:** ASEAN; GARCH; stochastic volatility; Value-at-Risk

**JEL Classification:** C58; F37; G15; G17
