Extreme Value Theory versus traditional GARCH approaches applied to financial data: a comparative evaluation

Although stock prices fluctuate, the variations are relatively small and are frequently assumed to be normal distributed on a large time scale. But sometimes these fluctuations can become determinant, especially when unforeseen large drops in asset prices are observed that could result in huge losses or even in market crashes. The evidence shows that these events happen far more often than would be expected under the generalized assumption of normal distributed financial returns. Thus it is crucial to properly model the distribution tails so as to be able to predict the frequency and magnitude of extreme stock price returns. In this paper we follow the approach suggested by McNeil and Frey (2000) and combine the GARCH-type models with the Extreme Value Theory (EVT) to estimate the tails of three financial index returns DJI,FTSE 100 and NIKKEI 225 representing three important financial areas in the world. Our results indicate that EVT-based conditional quantile estimates are much more accurate than those from conventional AR-GARCH models assuming normal or Student’s t-distribution innovations when doing out-of-sample estimation (within the insample estimation, this is so for the right tail of the distribution of returns).

Measuring and evaluating the impacts of TOD measures: searching for evidence of TOD characteristics in Azambuja train line

TOD (Transit Oriented Development) is typically defined as a high density mixed area (residential and commercial) within easy walking distance of a high capacity public transport station (typically within an 800m buffer area). TOO is viewed as a set of strategies to increase the use of public transport, increasing walking activity, containing urban sprawl, and creating more liveable places. It is believed that this type of combined strategies will improve sustainable growth. This work is an exploratory work for evidence of TOD characteristics in train station areas in Azambuja train line, setting further methodologies to evaluate the success of TOD areas.