Empirical Analysis of Stock Markets That Are More Prone ToLosses: A Standard Coverage TestApproach

Empirical Analysis of Stock Markets That Are More Prone ToLosses: A Standard Coverage TestApproach

Stock Market Losses; Standard Coverage Test, Stock Markets; Diversification; Risk Management

Stock market losses have been a recurring phenomenon in financial marketswith far reaching implications for investorsas it directly impacts the value of their portfolios andpotentially jeopardizing retirement savings leading to a loss of income. Identifyingstock markets that may realise less returns on investments has beencritical area for portfolio managers and active market participants.Therefore, the aim of this study was to empirically investigate financial markets that are prone to losses in order to safeguard and protect investments. A standard coverage test analysis was applied in five selected marketsfor a sample period from June 7, 2018 to June 7, 2023. This coverage test was used to identify stock markets that breached their generalised indicators and expected losses.The findings revealed that stock market losses are significantly higher in the CAC 40 and Nikkei 225. This was evident in the significant risk violations from their expected levels. By implication, investors willing to invest in the CAC 40 and Nikkei 225 are advised to use sector diversification strategies, stop-loss orders and long term investment strategy to mitigate some of these losses.

Samuel Tabot Enow1

https://dinastipub.org/DIJEFA/article/view/1924/1401

The IIE Varsity College

17 October 2023

Samuel Tabot Enow1

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English

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