The Investigation of the Tradeoff between Value-at-Risk and Excess Returns

• Main Authors: Chia-Hui Chu, 朱家慧
• Other Authors: 鄭婉秀
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/02576043158974988837

碩士 === 淡江大學 === 財務金融學系碩士班 === 99 === This paper examines the relationship between risk and excess returns in the U.S. stock market. The main risk measure variables are realized volatility (RV) of the traditional risk and Value-at-Risk (VaR) of downside risk. Moreover, comparing RV with VaR for the sake of finding a best explaining power of evaluating the risk-return tradeoff. In order to forecast VaR, we employ skewed generalized t (SGT) distribution, to capture skewness, fat-tails and leptokurtosis of financial assets, and rolling window method. Furthermore, we also investigate that whether the relationship between risk and returns changes during the period of global financial tsunami. The data period is from 2004 to 2010. Empirical results indicate that VaR of SGT distribution is superior to bootstrapping even at the strict level of confidence. Value-at-Risk has a positive and significant relationship between risk and excess returns. However, realized volatility only has a positive relationship with excess returns in 30, 60, and 90 days. Finally, we find that any risk measure variables is difficult to define the risk-return tradeoff during the period of global financial tsunami.