Term Structure of Risk Under Alternative Econometric Specifications

28 Pages Posted: 22 Nov 2004

See all articles by Allan Timmermann

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Massimo Guidolin

Bocconi University, Dept. of Finance; Bocconi University - CAREFIN - Centre for Applied Research in Finance

Multiple version iconThere are 3 versions of this paper

Date Written: September 2004

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: Term structure of risk, nonlinear econometric models, simulation models

JEL Classification: G12

Suggested Citation

Timmermann, Allan and Guidolin, Massimo, Term Structure of Risk Under Alternative Econometric Specifications (September 2004). Available at SSRN: https://ssrn.com/abstract=623827

Allan Timmermann (Contact Author)

UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0553
United States
858-534-0894 (Phone)

HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Massimo Guidolin

Bocconi University, Dept. of Finance ( email )

Via Roentgen, 1
2nd floor
Milan, MI 20136
Italy

Bocconi University - CAREFIN - Centre for Applied Research in Finance

Via Sarfatti 25
Milan, 20136
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
24
Abstract Views
1,280
PlumX Metrics