Extreme equities risk in emerging markets: evidence from Australia

D. E. Allen, A. R. Kramadibrata, R. J. Powell, A. K. Singh

Research output: Contribution to journalArticlepeer-review


The huge volatility experienced by equities markets during the Global Financial Crisis (GFC) underlined the importance of understanding market risk in extreme economic conditions. Whilst the Australian economy is widely considered to have fared better than many of its global counterparts during the GFC, there was nonetheless extreme volatility experienced in Australian financial markets. To understand the extent to which emerging Australian entities were impacted by these extreme events as compared to established entities, this paper compares entities comprising the Emerging Markets Index (EMCOX) to established entities comprising the S&P/ASX 200 Index using four risk metrics. The first two are Value at Risk (VaR) and Distance to Default (DD) which are traditional measures of market and credit risk. The other two focus on extreme risk in the tail of the distribution and include Conditional Value at Risk (CVaR) and Conditional Distance to Default (CDD), the latter metric being unique to the authors and which applies CVaR techniques to default measurement. We apply these measures both prior to and during the GFC, including an analysis of high, medium and low risk quantiles and find that Emerging Market shares show higher risk for all metrics used, the spread between the emerging and established portfolios narrows during the GFC period and that the default risk spread between the two portfolios is greatest in the tail of the distribution. This information can be important to both investors and lenders in determining share or loan portfolio mix in extreme economic circumstances.
Original languageEnglish
Pages (from-to)75 – 84
Number of pages10
JournalGlobal Review of Accounting and Finance
Issue number1
Publication statusPublished - Mar 2013
Externally publishedYes


Dive into the research topics of 'Extreme equities risk in emerging markets: evidence from Australia'. Together they form a unique fingerprint.

Cite this