Term structure of risk under alternative econometric specifications

Massimo Guidolin and Allan Timmerman

No 2005-001, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper characterizes the term structure of risk measures such as Value at Risk (VaR) and expected shortfall under different econometric approaches including multivariate regime switching, GARCH-in-mean models with student-t errors, two-component GARCH models and a non-parametric bootstrap. We show how to derive the risk measures for each of these models and document large variations in term structures across econometric specifications. An out-of-sample forecasting experiment applied to stock, bond and cash portfolios suggests that the best model is asset- and horizon specific but that the bootstrap and regime switching model are best overall for VaR levels of 5% and 1%, respectively.

Keywords: time series analysis; Econometric models (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-rmg
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Published in Journal of Econometrics, March-April 2006, 131(1-2), pp. 285-308

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Related works:
Journal Article: Term structure of risk under alternative econometric specifications (2006)
Working Paper: Term Structure of Risk Under Alternative Econometric Specifications (2004)
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DOI: 10.20955/wp.2005.001

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