EconPapers    
Economics at your fingertips  
 

Short-horizon regulation for long-term investors

Zhen Shi and Bas J.M. Werker

Journal of Banking & Finance, 2012, vol. 36, issue 12, 3227-3238

Abstract: We study the effects of imposing repeated short-horizon regulatory constraints on long-term investors. We show that Value-at-Risk and Expected Shortfall constraints, when imposed dynamically, lead to similar optimal portfolios and wealth distributions. We also show that, in utility terms, the costs of imposing these constraints can be sizeable. For a 96% funded pension plan, both an annual Value-at-Risk constraint and an annual Expected Shortfall constraint can lead to an economic cost of about 2.5–3.8% of initial wealth over a 15-year horizon.

Keywords: Portfolio choice; Value-at-Risk; Expected Shortfall; Pension funds (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426612001070
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:36:y:2012:i:12:p:3227-3238

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-09-29
Handle: RePEc:eee:jbfina:v:36:y:2012:i:12:p:3227-3238