Is Historical VAR a Reliable Tool for Relative Risk Measurement in the Colombian Stock Market?: An Empirical Analysis Using the Coefficient of Variation

17 Pages Posted: 11 Feb 2004

See all articles by Edgardo Cayon Fallon

Edgardo Cayon Fallon

Colegio de Estudios Superiores de Administracion

Julio Sarmiento-Sabogal

Pontificia Universidad Javeriana

Date Written: December 11, 2003

Abstract

Value-at-Risk (VaR) has become one of the most used techniques in financial risk management. The purpose of this paper is to address how well the technique holds in a thinly traded environment, such as the one in the Colombian stock market. Our purpose is to measure the efficiency of Value-at-Risk in terms of the coefficient of variation, which has been long used by practitioners, and treated frequently in the literature, as a measure of relative risk which is relatively easy to implement. Indeed, by using a simple regression analysis our purpose is to show how well does VaR (specifically historical VaR) as an dependent variable holds in terms of the coefficient of variation as our independent variable.

Keywords: VaR, Value at Risk, Colmbian Stock Market

JEL Classification: G11, G10, C14, G39, G19

Suggested Citation

Cayon Fallon, Edgardo and Sarmiento-Sabogal, Julio, Is Historical VAR a Reliable Tool for Relative Risk Measurement in the Colombian Stock Market?: An Empirical Analysis Using the Coefficient of Variation (December 11, 2003). Available at SSRN: https://ssrn.com/abstract=478718 or http://dx.doi.org/10.2139/ssrn.478718

Edgardo Cayon Fallon

Colegio de Estudios Superiores de Administracion ( email )

Calle 35 No. 6-16
Bogota
Colombia

Julio Sarmiento-Sabogal (Contact Author)

Pontificia Universidad Javeriana ( email )

Carrera 7 # 40-62 Piso 4
FCEA-Depto de Administración
Bogota, D.C. 00001
Colombia
(57-1)3208320 ext 3156 (Phone)
(57-1)3208320 ext 3169 (Fax)

HOME PAGE: http://www.javeriana.edu.co/decisiones/Julio

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