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Short and Long Term Value at Risk, Skewness, Kurtosis and Coherent Risk Measure

Author

Listed:
  • Weiping Li
  • Guotai Chi
  • Bin Meng

Abstract

Standard risk management focuses on short-run risks rather than longer periods. We introduce an improved risk measure which can be used to estimate both short-and long-term structure of value at risk and the corresponding expected shortfall. The short- and long-term coherent measure of risk is specified and computed for both S&P 500, HSI and SHSZ 300. We also test long-term skewness and kurtosis from empirical analysis for S&P 500, HSI and SHSZ 300. We also show that our improved risk measure gives a better estimate of the value at risk for short horizons and never decreases to negative values like VaR for long-run horizons. Both long-term skewness and kurtosis for HSI and SHSZ 300 are analyzed empirically.

Suggested Citation

  • Weiping Li & Guotai Chi & Bin Meng, 2016. "Short and Long Term Value at Risk, Skewness, Kurtosis and Coherent Risk Measure," Applied Economics and Finance, Redfame publishing, vol. 3(3), pages 65-80, August.
    • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:3:p:65-80
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    References listed on IDEAS

    as
    1. Acerbi, Carlo & Tasche, Dirk, 2002. "On the coherence of expected shortfall," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1487-1503, July.
    2. Robert Engle, 2004. "Risk and Volatility: Econometric Models and Financial Practice," American Economic Review, American Economic Association, vol. 94(3), pages 405-420, June.
    3. Robert F. Engle, 2011. "Long-Term Skewness and Systemic Risk," Journal of Financial Econometrics, Oxford University Press, vol. 9(3), pages 437-468, Summer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    risk management; short-term risk; long-term risk; skewness; kurotosis; systemic risk;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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