Proceedings of the 2nd International Conference on Sciences, Mathematics, and Education 2023 (ICOSMED 2023)

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Identifying Instability in the G7 Stock Market Using Two-Regime MS-GARCH Family Model as Risk Measurement Forecasting

Authors
Darmanto Darmanto1, 3, *, Isnani Darti2, Suci Astutik3, Nurjanah Nurjanah2
1Ph.D. Student of Dept. Of Mathematics, Universitas Brawijawa, Malang, Indonesia
2Dept. of Mathematics, Universitas Brawijawa, Malang, Indonesia
3Dept. of Statistics, Universitas Brawijaya, Malang, Indonesia
*Corresponding author. Email: darman_stat@ub.ac.id
Corresponding Author
Darmanto Darmanto
Available Online 28 July 2025.
DOI
10.2991/978-2-38476-410-5_4How to use a DOI?
Keywords
two-regime MS-GARCH; G7 stock market; risk measurement forecasting
Abstract

This study aims to investigate the instability of the G7 stock market by forecasting value at risk (VaR) as a measure of risk with a two-regime MS-GARCH family model approach. Daily data of composite stock returns from January 2010 to September 2023 from each G7 country are studied. Of the seven stocks from the G7 financial markets, it is found that all returns have the properties of non-normally distributed, leptokurtic, stationary at the mean, time-dependency, volatility, clustering volatility, and fat-tailed. Based on backtesting, significance testing of parameter estimates, and stationarity of the regime-switching process, it is found that the Canadian (TSX Composite Index: ^GSPTSE) and UK (London Stock Exchange: LSEG.L) markets are not suitable to be modeled with the model used in this study. The other five countries fit the MSEGARCH(1,1) (France - CAC 40: ^FCHI and Japan - Nikkei 225: ^N225) and MS-GJRGARCH(1,1) (United States - Nasdaq Composite: ^IXIC, Germany -Deutsche Boerse: DB1.DE, and Italy - FTSE MIB Index: FTSEMIB.MI) model approaches.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2nd International Conference on Sciences, Mathematics, and Education 2023 (ICOSMED 2023)
Series
Advances in Social Science, Education and Humanities Research
Publication Date
28 July 2025
ISBN
978-2-38476-410-5
ISSN
2352-5398
DOI
10.2991/978-2-38476-410-5_4How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Darmanto Darmanto
AU  - Isnani Darti
AU  - Suci Astutik
AU  - Nurjanah Nurjanah
PY  - 2025
DA  - 2025/07/28
TI  - Identifying Instability in the G7 Stock Market Using Two-Regime MS-GARCH Family Model as Risk Measurement Forecasting
BT  - Proceedings of the 2nd International Conference on Sciences, Mathematics, and Education 2023 (ICOSMED 2023)
PB  - Atlantis Press
SP  - 24
EP  - 40
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-410-5_4
DO  - 10.2991/978-2-38476-410-5_4
ID  - Darmanto2025
ER  -