Abstract
In this paper we compared the results between stock portfolios of North American and European airlines. The model accesses the market risk using Value-at-Risk approach in both portfolios over one month period. The analysis was performed through the use of GARCH-EVT methods and Student's-t Copula with a Monte Carlo Simulation. The assets in the financial market usually present heavy tails in their probability distributions, so, a process capable to deal with this issue is crucial to measure the risk of loss. We analyzed the period from mid-2007 to mid-2012 to compose comparison between these two portfolios. The financial crisis of 2008 had a great impact in the North America market in relative to the European market. The central role of transport in the economy makes studies dealing with investment risk measure in this sector crucial for the industrial development. The volatility of risk in the airline market happens by internal and external motives and the methodological development of financial tools can offer an important contribution due the investment flux dependency.
Highlights
This paper presents an analysis of potential loss between two portfolios of stocks from aviation companies from the United States and Europe using Value-at-Risk (VaR) framework
It is far superior to the normal distribution curve which has too thin of tails to capture the market overreactions commonly found in financial markets
The impact of the 2008 crisis in the global economy promoted a serious downturn in the aviation stock market
Summary
This paper presents an analysis of potential loss between two portfolios of stocks from aviation companies from the United States and Europe using Value-at-Risk (VaR) framework. Despite the civil aviation market is of global market, reflections and economic structures of the companies still meet certain aspects imposed by their home countries or regions where it operates In this turbulent time of financial instability we may pose a question if the volatility in the stock values of United States airlines is greater than the in Europe. We present the main theories used to process the data, the ARMA-GARCH model, Extreme Value Theory (EVT), Copulas and Value-at-Risk These are extense themes, making it impossible to cover and review all aspects in this paper. The result analysis section shows the main findings of this research and limitations, and the conclusion gives an overview and sugestion for further research
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