Value-at-Risk and Expected Stock Returns: Evidence from Pakistan

Javed Iqbal and Sara Azher ()
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Sara Azher: Department of Statistics, University of Karachi, Pakistan.

Lahore Journal of Economics, 2014, vol. 19, issue 2, 71-100

Abstract: This study investigates whether exposure to downside risk, as measured by value-at-risk (VaR), explains expected returns in an emerging market, i.e., Pakistan. We find that portfolios with a higher VaR are associated with higher average returns. In order to explore the empirical performance of VaR at the portfolio level, we use a time series approach based on 25 size and book-to-market portfolios. Based on monthly portfolio data for October 1992 to June 2008, the results show that VaR has greater explanatory power than the market, size, and book-to-market factors.

Keywords: Value-at-risk; emerging market; Fama-French factors (search for similar items in EconPapers)
JEL-codes: C32 G32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:lje:journl:v:19:y:2014:i:2:p:71-100

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