On downside risk predictability through liquidity and trading activity: a quantile regression approach

Lidia Sanchis-Marco () and Antonio Rubia Serrano
Additional contact information
Lidia Sanchis-Marco: Dpto. Análisis Económico y Finanzas
Antonio Rubia Serrano: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Most downside risk models implicitly assume that returns are a sufficient statistic with which to forecast the daily conditional distribution of a portfolio. In this paper, we address this question empirically and analyze if the variables that proxy for market liquidity and trading conditions convey valid information to forecast the quantiles of the conditional distribution of several representative market portfolios. Using quantile regression techniques, we report evidence of predictability that can be exploited to improve Value at Risk forecasts. Including trading- and spread-related variables improves considerably the forecasting performance.

Keywords: Value at Risk; Basel; Liquidity; Trading Activity. (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-06
New Economics Papers: this item is included in nep-for, nep-mst and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-14.pdf Fisrt version / Primera version, 2011 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2011-14

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().