Details
| Original language | English |
|---|---|
| Article number | 105769 |
| Number of pages | 24 |
| Journal | Journal of Econometrics |
| Volume | 241 |
| Issue number | 2 |
| Publication status | Published - Apr 2024 |
Abstract
Keywords
- Return forecasting, Tail event forecasting, Tail risk
ASJC Scopus subject areas
- Mathematics(all)
- Applied Mathematics
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Econometrics, Vol. 241, No. 2, 105769, 04.2024.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Measuring Tail Risk
AU - Dierkes, Maik
AU - Hollstein, Fabian
AU - Prokopczuk, Marcel
AU - Würsig, Christoph Matthias
N1 - © 2024 The Author(s).
PY - 2024/4
Y1 - 2024/4
N2 - We comprehensively investigate the usefulness of tail risk measures proposed in the literature. We evaluate their statistical as well as their economic validity. The option-implied measure of Bollerslev and Todorov (2011b) (𝐵𝑇 11𝑄) performs best overall. While some other tail risk measures excel at specialized tasks, 𝐵𝑇 11𝑄 performs well in all tests: First, 𝐵𝑇 11𝑄 can predict both future tail events and future tail volatility. Second, it has predictive power for returns in both the time series and the cross-section, as well as for real economic activity. Finally, a simulation analysis shows that the main driver of performance is measurement error.
AB - We comprehensively investigate the usefulness of tail risk measures proposed in the literature. We evaluate their statistical as well as their economic validity. The option-implied measure of Bollerslev and Todorov (2011b) (𝐵𝑇 11𝑄) performs best overall. While some other tail risk measures excel at specialized tasks, 𝐵𝑇 11𝑄 performs well in all tests: First, 𝐵𝑇 11𝑄 can predict both future tail events and future tail volatility. Second, it has predictive power for returns in both the time series and the cross-section, as well as for real economic activity. Finally, a simulation analysis shows that the main driver of performance is measurement error.
KW - Return forecasting
KW - Tail event forecasting
KW - Tail risk
UR - http://www.scopus.com/inward/record.url?scp=85193617052&partnerID=8YFLogxK
U2 - 10.1016/j.jeconom.2024.105769
DO - 10.1016/j.jeconom.2024.105769
M3 - Article
VL - 241
JO - Journal of Econometrics
JF - Journal of Econometrics
SN - 0304-4076
IS - 2
M1 - 105769
ER -