USING THE VALUE AT RISK METHOD IN ESTIMATION OF INVESTMENT RISK IN THE METALLURGICAL SECTOR COMPANIES

Abstract

The aim of this paper is to analyze the merits of using the Value At Risk method in estimating the risk associated with investments in metallurgical sector companies. The paper presents how to construct the model, various methods of its estimation and their advantages and disadvantages. In the research part of the paper, we analyze typical features of the returns distribution characteristic for metallurgical companies listed on the Polish stock exchange, and on their basis we select the method of the Value at Risk estimation. The analysis was made by comparing individual metallurgical companies to the Warsaw Stock Exchange Index (WIG). We also evaluated the usefulness of the variance-covariance method by examining the number of exceedances of the designated value exposed at the assumed levels of significance.