The optimal portfolio under VaR and ES

Henryk Gurgul and Artur Machno ()

Operations Research and Decisions, 2014, vol. 24, issue 2, 59-79

Abstract: An analysis of the dependence structure among certain European indices (FTSE100, CAC40, DAX30, ATX20, PX, BUX and BIST) has been conducted. The main features of the financial data were studied: asymmetry, fat-tailedness (leptokurtosis), variability and mutual dependence. We have fitted a regime switching copula based model including asymmetric and fat-tailed copulas. All the indices are left-skewed and fat-tailed. Large indices are more skewed and less fail-tailed. The findings suggest that size of a market has an influence on its properties. A particular behaviour of the Turkish market suggests the importance of geographical factors. It is also suggested that the maturity of a market is insignificant in the analysis. Another important conclusion drawn from our empirical investigation is that VaR is a less exact risk measure than ES. However, the dynamics of the temporal and statistical properties of both measures are similar.

Keywords: value at risk; expected shortfall; interdependence; regime copulas; vine copula (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:wut:journl:v:2:y:2014:p:59-79:id:1094

DOI: 10.5277/ord140203

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