Forecasting Expected Shortfall: Should we use a Multivariate Model for Stock Market Factors?

Alain-Philippe Fortin (), Jean-Guy Simonato () and Georges Dionne ()
Additional contact information
Alain-Philippe Fortin: HEC Montreal, Canada Research Chair in Risk Management
Jean-Guy Simonato: HEC Montreal, Department of Finance

No 18-4, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: Is univariate or multivariate modelling more effective when forecasting the market risk of stock portfolios? We examine this question in the context of forecasting the one-week-ahead Expected Shortfall of a portfolio invested in the Fama-French and momentum factors. Applying extensive tests and comparisons, we find that in most cases there are no statistically significant differences between the forecasting accuracy of the two approaches. This result suggests that univariate models, which are more parsimonious and simpler to implement than multivariate models, can be used to forecast the downsize risk of equity portfolios without losses in precision.

Keywords: Value-at-Risk; Expected Shortfall; Conditional Value-at-Risk; Elicitability; model comparison; backtesting; Fama-French and momentum factors (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 C53 G17 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-06-01, Revised 2021-06-25
New Economics Papers: this item is included in nep-fmk, nep-for, nep-knm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.risksresearch.com/_files/ugd/a6eed3_04 ... acad2e7f3e074e1b.pdf Full text (application/pdf)

Related works:
Journal Article: Forecasting expected shortfall: Should we use a multivariate model for stock market factors? (2023)
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:ris:crcrmw:2018_004

Access Statistics for this paper

More papers in Working Papers from HEC Montreal, Canada Research Chair in Risk Management Contact information at EDIRC.
Bibliographic data for series maintained by Claire Boisvert ().