Evaluating Portfolio Value-At-Risk Using Semi-Parametric GARCH Models
In this paper we examine the usefulness of multivariate semi-parametric GARCH models for evaluating the Value-at-Risk (VaR) of a portfolio with arbitrary weights. We specify and estimate several alternative multivariate GARCH models for daily returns on the S&P 500 and Nasdaq indexes. Examining the within sample VaRs of a set of given portfolios shows that the semi-parametric model performs uniformly well, while parametric models in several cases have unacceptable failure rates. Interestingly, distributional assumptions appear to have a much larger impact on the performance of the VaR estimates than the particular parametric specification chosen for the GARCH equations.
|Keywords||asset allocation, multivariate GARCH, semi-parametric estimation, value-at-risk|
Rombouts, J.V.K., & Verbeek, M.J.C.M.. (2009). Evaluating Portfolio Value-At-Risk Using Semi-Parametric GARCH Models (No. ERS-2004-107-F&A). Retrieved from http://hdl.handle.net/1765/1833