VaR is subject to a significant positive bias
AbstractThis article shows that value-at-risk (VaR), the most popular risk measure in financial practice, has a considerable positive bias when used for a portfolio with fat-tail distribution. The bias increases with higher confidence level, heavier tails, and smaller sample size. Also, the Harrell-Davis quantile estimator and its simulation counterpart, called the bootstrap estimator, tend to have a more significant positive bias for fat-tail distributions.
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Bibliographic InfoArticle provided by Elsevier in its journal Statistics & Probability Letters.
Volume (Year): 72 (2005)
Issue (Month): 4 (May)
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description
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