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On Risk Prediction
Umeå University, Faculty of Social Sciences, Department of Economics.
2009 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis comprises four papers concerning risk prediction.

Paper [I] suggests a nonlinear and multivariate time series model

framework that enables the study of simultaneity in returns and in

volatilities, as well as asymmetric effects arising from shocks. Using

daily data 2000-2006 for the Baltic state stock exchanges and that of

Moscow we find recursive structures with Riga directly depending in

returns on Tallinn and Vilnius, and Tallinn on Vilnius. For volatilities

both Riga and Vilnius depend on Tallinn. In addition, we find evidence

of asymmetric effects of shocks arising in Moscow and in the Baltic states

on both returns and volatilities.

Paper [II] argues that the estimation error in Value at Risk predictors

gives rise to underestimation of portfolio risk. A simple correction is

proposed and in an empirical illustration it is found to be economically

relevant.

Paper [III] studies some approximation approaches to computing the

Value at Risk and the Expected Shortfall for multiple period asset re-

turns. Based on the result of a simulation experiment we conclude that

among the approaches studied the one based on assuming a skewed t dis-

tribution for the multiple period returns and that based on simulations

were the best. We also found that the uncertainty due to the estimation

error can be quite accurately estimated employing the delta method. In

an empirical illustration we computed five day Value at Risk's for the

S&P 500 index. The approaches performed about equally well.

Paper [IV] argues that the practise used in the valuation of the port-

folio is important for the calculation of the Value at Risk. In particular,

when liquidating a large portfolio the seller may not face horizontal de-

mandcurves. We propose a partially new approach for incorporating

this fact in the Value at Risk and in an empirical illustration we compare

it to a competing approach. We find substantial differences.

Place, publisher, year, edition, pages
Umeå: Umeå universitet , 2009.
Series
Umeå economic studies, ISSN 0348-1018 ; 770
Keyword [en]
Finance, Time series, GARCH, Estimation error, Asymmetry, Supply and demand
National Category
Economics
Research subject
Econometrics
Identifiers
URN: urn:nbn:se:umu:diva-22200OAI: oai:DiVA.org:umu-22200DiVA: diva2:213646
Public defence
2009-05-20, S312, Samhällsvetarhuset , Umeå Universitet, Umeå, 10:15 (English)
Opponent
Supervisors
Available from: 2009-04-29 Created: 2009-04-27 Last updated: 2009-04-29Bibliographically approved
List of papers
1. Simultaneity and asymmetry of returns and volatilities: the emerging Baltic States' stock exchanges
Open this publication in new window or tab >>Simultaneity and asymmetry of returns and volatilities: the emerging Baltic States' stock exchanges
2012 (English)In: Studies in Nonlinear Dynamics and Econometrics, ISSN 1081-1826, Vol. 16, no 1, 22 p.Article in journal (Refereed) Published
Abstract [en]

The paper suggests a nonlinear and multivariate time series model framework that enables the study of simultaneity in returns and in volatilities, as well as asymmetric effects arising from shocks. Using daily data 2000-2006 for the Baltic state stock exchanges and that of Moscow we find recursive structures with Riga directly depending in returns on Tallinn and Vilnius, and Tallinn on Vilnius. For volatilities both Riga and Vilnius depend on Tallinn. In addition,we find evidence of asymmetric effects of shocks arising in Moscow and in the Baltic state on both returns and volatilities.

Place, publisher, year, edition, pages
Walter de Gruyter, 2012. 22 p.
Keyword
Time series, nonlinear, multivariate, finance, value at risk, portfolio allocation
National Category
Economics
Research subject
Econometrics
Identifiers
urn:nbn:se:umu:diva-22196 (URN)10.1515/1558-3708.1855 (DOI)
Distributor:
Institutionen för nationalekonomi, 90187, Umeå
Available from: 2009-04-28 Created: 2009-04-27 Last updated: 2013-02-12Bibliographically approved
2. A corrected value-at-risk predictor
Open this publication in new window or tab >>A corrected value-at-risk predictor
2010 (English)In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 17, no 12, 1193-1196 p.Article in journal (Refereed) Published
Abstract [en]

In this note it is argued that the estimation error in Value-at-Risk predictors gives rise to underestimation of portfolio risk. We propose a simple correction and in an empirical illustration we find that it is economically relevant.

National Category
Economics
Identifiers
urn:nbn:se:umu:diva-22197 (URN)10.1080/17446540902817619 (DOI)000280264200012 ()
Available from: 2009-04-27 Created: 2009-04-27 Last updated: 2012-01-30Bibliographically approved
3. Uncertainty of multiple period risk predictors
Open this publication in new window or tab >>Uncertainty of multiple period risk predictors
2009 (English)Report (Other academic)
Place, publisher, year, edition, pages
Umeå: Umeå universitet, 2009. 56 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 768
National Category
Economics
Identifiers
urn:nbn:se:umu:diva-22198 (URN)
Distributor:
Institutionen för nationalekonomi, 90187, Umeå
Available from: 2009-04-27 Created: 2009-04-27 Last updated: 2012-03-13
4. Value at risk for large portfolios
Open this publication in new window or tab >>Value at risk for large portfolios
2011 (English)In: Finance Research Letters, ISSN 1544-6123, E-ISSN 1544-6131, Vol. 8, no 2, 18 p.59-68 p.Article in journal (Refereed) Published
Abstract [en]

We argue that the practise used in the valuation of the portfolio is important for the calculation of the Value at Risk. In particular, when liquidating a large portfolio the seller may not face horizontal demand curves. We propose a partially new approach for incorporating this fact in the Value at Risk and in an empirical illustration we compare it to a competing approach. We find substantial differences.

Place, publisher, year, edition, pages
Elsevier, 2011. 18 p.
Keyword
Demand, Supply, Liquidity Risk, Limit Order Book, Bank, Sweden
National Category
Economics
Research subject
Econometrics
Identifiers
urn:nbn:se:umu:diva-22199 (URN)10.1016/j.frl.2010.10.002 (DOI)
Distributor:
Institutionen för nationalekonomi, 90187, Umeå
Available from: 2009-04-28 Created: 2009-04-27 Last updated: 2013-02-12Bibliographically approved

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