Liquidity-Adjusted Value-at-Risk for TWSE Leverage/ Inverse ETFs: A Hellinger Distance Measure Research

Chui-Chun Tsai () and Tsun-Siou Lee
Additional contact information
Chui-Chun Tsai: Department of Accounting, Providence University, Taiwan
Tsun-Siou Lee: Department of Finance, National Taiwan University, Taiwan

Journal of Economics and Management, 2017, vol. 13, issue 1, 53-81

Abstract: This paper empirically investigates the liquidity-adjusted Value-at-Risk (LaVaR) of TWSE Leverage/Inverse ETFs using the Hellinger distance measure by sensitizing endogenous liquidity risk with trade sizes at 1%, 3%, and 6%. By incorporating adjusted exogenous and endogenous liquidity risk, we find that LaVaR produces more accurate risk estimates and increases with trade size. The practical failure rates of all ETFs are largely consistent with their theoretical failure rates. Despite the use of different empirical models, China ETFs have a higher risk level than Taiwan ETFs in both bullish and bearish markets.

Keywords: LaVaR; TWSE leverage/inverse ETFs; hellinger distance measure; exogenous liquidity risk; endogenous liquidity risk (search for similar items in EconPapers)
JEL-codes: C58 D81 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.jem.org.tw/content/pdf/Vol.13No.1/03.pdf (application/pdf)
http://www.jem.org.tw/content/abstract/Vol.13No.1/English/03.htm (text/html)

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:jec:journl:v:13:y:2017:i:1:p:53-81

Access Statistics for this article

Journal of Economics and Management is currently edited by Cathy W. S. Chen and Shih-Wen Hu

More articles in Journal of Economics and Management from College of Business, Feng Chia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Yi-Ju Su ().