ARMA-GARCH model for value-at-risk (VaR) prediction on stocks of PT. Astra Agro Lestari.Tbk

Abstract

PT. Astra Agro Lestari Tbk (AALI) is one of the plantation companies with the largest market capitalization in Indonesia. AALI stocks traded on the stock exchange have fairly fluctuating value and volatility of stock returns are not constant (heteroskedastic). One of the risk measurements that can be used to predict the risk of stock investing is Value-at-Risk (VaR). In conditions that are heteroskedastic stock returns, risk prediction can be done with the VaR ARCH/GARCH and VaR ARCH/GARCH combination model. Empirical studies were carried out on AALI stocks for the period of August 2, 2012 until October 1, 2019. The results obtained showed that the best model was ARIMA (0,0,1)-GARCH (1,2) with AIC value of -4.9793 and MSE of 0.00005. At the 95% trust level, the VaR ARCH/ARCH value was -0.3464.