Stress-Testing Portfolio-Specific Risk

Journal of Investment Management (JOIM), Fourth Quarter 2013

Posted: 15 Nov 2014

See all articles by Jason Fink

Jason Fink

James Madison University - College of Business

Kristin Fink

James Madison University - College of Business

Hui He

International Monetary Fund

Date Written: 2014

Abstract

We establish a relationship between the idiosyncratic risk of portfolios and a parsimonious group of market variables. Because we are able to summarize idiosyncratic risk with this small group of variables, we are able to design stress-tests that describe portfolio-specific risks as market variables change. These stress tests provide portfolio managers with important information that cannot be gleaned from standard volatility forecasts.

Keywords: Portfolio idiosyncratic risks, stress-test, market variables

JEL Classification: G00

Suggested Citation

Fink, Jason and Fink, Kristin and He, Hui, Stress-Testing Portfolio-Specific Risk (2014). Journal of Investment Management (JOIM), Fourth Quarter 2013, Available at SSRN: https://ssrn.com/abstract=2439994

Jason Fink (Contact Author)

James Madison University - College of Business ( email )

Harrisonburg, VA 22807
United States
540-568-8107 (Phone)

Kristin Fink

James Madison University - College of Business ( email )

Harrisonburg, VA 22807
United States

Hui He

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://https://huihe.weebly.com/

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