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Market capitalization and Value-at-Risk

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journal contribution
posted on 13.08.2014, 16:04 by Alexandra Dias
The potential of economic variables for financial risk measurement is an open field for research. This article studies the role of market capitalization in the estimation of Value-at-Risk (VaR). We test the performance of different VaR methodologies for portfolios with different market capitalization. We perform the analysis considering separately financial crisis periods and non-crisis periods. We find that VaR methods perform differently for portfolios with different market capitalization. For portfolios with stocks of different sizes we obtain better VaR estimates when taking market capitalization into account. We also find that it is important to consider crisis and non-crisis periods separately when estimating VaR across different sizes. This study provides evidence that market fundamentals are relevant for risk measurement.

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Citation

Alexandra Dias, Market capitalization and Value-at-Risk, Journal of Banking & Finance, Volume 37, Issue 12, December 2013, Pages 5248-5260

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCE/School of Management

Version

AM (Accepted Manuscript)

Published in

Alexandra Dias

Publisher

Elsevier

issn

0378-4266

Copyright date

2013

Available date

13/08/2014

Publisher version

http://www.sciencedirect.com/science/article/pii/S0378426613001982

Language

en

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