Malaysian equities: A sector analysis of risk and normality
School of Business and Law
This study uses Value at Risk (VaR) and Conditional Value at Risk (CVaR) metrics to measure the relative riskiness of sectors for Malaysian equities. VaR is a widely used volatility measure, but only measures risk below a specified threshold, whereas CVaR looks at risk beyond that threshold. The study finds that the relative risk of sectors changes with changing economic circumstances as measured by VaR, but remains significantly the same as measured by CVaR. Parametric (normally distributed) measures of VaR are compared to nonparametric measures, and it is found, consistently across all sectors, that parametric measures are not suitable measures of volatility for Malaysian equities due to a large spread in tail risk.