Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86168
Authors: 
Mittnik, Stefan
Year of Publication: 
2013
Series/Report no.: 
CFS Working Paper 2013/05
Abstract: 
Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more effi cient tail-correlation estimates by use of overidenti cation strategies and how to guarantee positive semidefi niteness, a property required for valid risk aggregation and Markowitz-type portfolio optimization. An empirical application to a 30-asset universe illustrates the practical applicability and relevance of the approach in portfolio management.
Subjects: 
Downside risk
Estimation efficiency
Portfolio optimization
Positive semidefiniteness
Solvency II
Value-at-Risk
JEL: 
C1
G11
Document Type: 
Working Paper

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