Investors warned: Stock market model predicts potential losses of millions.
The researchers used a GARCH-M model to estimate Value at Risk (VaR) for PT Gudang Garam Tbk stock data from 2014 to 2018. They found that the best model was AR(1) without constants and GARCH(1.1)-M. At a 95% confidence level, the estimated VaR for the next period was -0.049702963. This means that if an investor invests Rp100,000,000, there is a 5% chance of losing up to Rp4,970,296.3.