Value-at-Risk of JCP Stock and Analysis of Calendar Effects

Abstract This paper presents the value-at-risk (VaR) analysis of J.C. Penney Company Inc. (JCP) stock daily negative log returns between 1993 and 2018. The statistical properties of JCP are thoroughly examined and a series of diagnostic tests are conducted to check the conditions of the time series data over the two decades. The GARCH and EGARCH models with normal distribution and Student’s t-distribution are used to estimate the volatility and VaR of the stock. By analyzing VaR, we show that there is currently a high risk of investing in JCP stock. In addition, this paper examines the calendar effects and seasonality of JCP stock through the fundamental properties of the data as well as the VaR. We compare the performance of the stock in four quarters which further confirms our result that JCP stock is at immense risk at this point in time. These results are valuable for anyone interested in evaluating and forecasting JCP stock. The methodology we use is applicable to any other stock that meets our test conditions and is more accurate and realistic in predicting volatility and VaR than the commonly used standard normal distribution based VaR model.

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Engineering Journal: Value-at-Risk of JCP Stock and Analysis of Calendar Effects

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