The CEO of your firm wants to know what the worst possible monthly return could be over the coming year. You decide to use extreme value theory to answer this question.

Specifically, you decide to use the block-maxima approach using the past eight years of data, as provided in the table below. What do you expect the worst (most negative)

monthly return to be in the coming year?

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Month 1 2 3 4 1 2 6% 4% 7% 1% -3% 2% -1% 6% 2% 1% -5% 3 4 5 6 4% 12% -1% -1% 2% -2% 1% 5% 1% 2% -2% -3% 8% 0% -6% -2% -6% -4% 4% 6% 3% -15% -23% 1% -2% -14% -2% 4% -13% -5% 6% -1% -7% -1% 0% 4% 1% 0% 8% -5% 9% -4% -6% 6% 1% 5% -3% 0% 3% 7% -1% -2% -4% 1% 3% 2% -3% 0% 5% 5 -4% 6 7 8 9 10 11 12 Year 1% -1% -5% 0% -6% -4% 0% 4% 7 -3% 8 1% 4% 5% 3% 8% -10% 6% -7% -9% 9% -3% -3% -3% 1% 4% -4%