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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Stavros Stavroyiannis & Leonidas Zarangas, 2013. "Out of Sample Value-at-Risk and Backtesting with the Standardized Pearson Type-IV Skewed Distribution," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(2), pages 231-247, April.
  • Handle: RePEc:voj:journl:v:60:y:2013:i:2:p:231-247
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    References listed on IDEAS

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    Cited by:

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    3. Mesut BALLIBEY & Serpil TÜRKYILMAZ, 2014. "Value-at-Risk Analysis in the Presence of Asymmetry and Long Memory: The Case of Turkish Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 836-848.

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    More about this item

    Keywords

    Value-at-Risk; Econometric modeling; GARCH; Pearson type-IV distribution;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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