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Out of Sample Value-at-Risk and Backtesting with the Standardized Pearson Type-IV Skewed Distribution

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Author Info

  • Stavros Stavroyiannis

    ()
    (Department of Finance and Auditing, Technological Educational Institute of Kalamata, Greece)

  • Leonidas Zarangas

    ()
    (Department of Finance and Auditing, Technological Educational Institute of Epirus, Greece)

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    Abstract

    This paper studies the efficiency of an econometric model where the volatility is modeled by a GARCH (1,1) process, and the innovations follow a standardized form of the Pearson type-IV distribution. The performance of the model is examined by in sample and out of sample testing, and the accuracy is explored by a variety of Value-at-Risk methods, the success/failure ratio, the Kupiec-LR test, the independence and conditional coverage tests of Christoffersen, the expected shortfall measures, and the dynamic quantile test of Engle and Manganelli. Overall, the proposed model is a valid and accurate model performing better than the skewed Student-t distribution, providing the financial analyst with a good candidate as an alternative distributional scheme.

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    File URL: http://www.panoeconomicus.rs/casopis/2013_2/05%20Stavros%20Stavroyiannis%20and%20Leonidas%20Zarangas.pdf
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    Bibliographic Info

    Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

    Volume (Year): 60 (2013)
    Issue (Month): 2 (April)
    Pages: 231-247

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    Handle: RePEc:voj:journl:v:60:y:2013:i:2:p:231-247

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    Web page: http://www.panoeconomicus.rs/

    Related research

    Keywords: Value-at-Risk; Econometric modeling; GARCH; Pearson type-IV distribution;

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    References

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