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What is the “value” of value-at-risk in a simulated portfolio decision-making game?

Author

Listed:
  • Steinbacher, Matjaz

Abstract

In the paper, I simulate the social network games of a portfolio selection where agents consider VaR when managing their portfolios. Such agents behave quite differently from the agents considering only the expected returns of the alternatives that are available to them in time. The level of omniscience of agents and the presence of liquidity agents are demonstrated to be significant factors for the portfolio management.

Suggested Citation

  • Steinbacher, Matjaz, 2009. "What is the “value” of value-at-risk in a simulated portfolio decision-making game?," MPRA Paper 13866, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13866
    as

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    File URL: https://mpra.ub.uni-muenchen.de/13866/1/MPRA_paper_13866.pdf
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    References listed on IDEAS

    as
    1. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
    2. Steinbacher, Matjaz, 2009. "The Role of Liquidity Individuals in the Decision-Making," MPRA Paper 13566, University Library of Munich, Germany.
    3. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
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    Cited by:

    1. Steinbacher, Matjaz, 2009. "Behavior of Investors on a Multi-Asset Market," MPRA Paper 15898, University Library of Munich, Germany.
    2. Steinbacher, Matjaz, 2009. "Value-at-Risk versus Non-Value-at-Risk Traders," MPRA Paper 14295, University Library of Munich, Germany.

    More about this item

    Keywords

    social networks; portfolio decision-making; stochastic finance; Value-at-Risk;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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