EconPapers    
Economics at your fingertips  
 

Measurement of Common Risk Factors: A Panel Quantile Regression Model for Returns

Frantisek Cech and Jozef Baruník ()

Papers from arXiv.org

Abstract: This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized fixed effects estimator we are able to control for otherwise unobserved heterogeneity among financial assets. Direct benefits of the proposed approach are revealed in the portfolio Value-at-Risk forecasting application, where our modeling strategy performs significantly better than several benchmark models according to both statistical and economic comparison. In particular Panel Quantile Regression Model for Returns consistently outperforms all the competitors in the 5\% and 10\% quantiles. Sound statistical performance translates directly into economic gains which is demonstrated in the Global Minimum Value-at-Risk Portfolio and Markowitz-like comparison. Overall results of our research are important for correct identification of the sources of systemic risk, and are particularly attractive for high dimensional applications.

New Economics Papers: this item is included in nep-rmg
Date: 2017-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1708.08622 Latest version (application/pdf)

Related works:
Working Paper: Measurement of Common Risk Factors: A Panel Quantile Regression Model for Returns (2017) Downloads
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:arx:papers:1708.08622

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2019-02-10
Handle: RePEc:arx:papers:1708.08622