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Dr. Saša Žiković

University of Rijeka, Croatia

Authors: Saša Žiković and Randall K. Filer

Abstract: 

We introduce a new methodology for ranking and comparing the performance of VaR and ES models. The proposed ranking scheme is based on a nonparametric ANOVA test. The analysis of the relative performance of VaR and ES models is performed using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the global financial crisis. Simulation results show that for a large number of different VaR models there is no statistical difference in their performance measured by Lopez size adjusted score. Statistically significant top performers are conditional EVT GARCH, models based on volatility updating (HW and FHS) and nonparametric mirrored historical simulation. ES backtesting results are similar to VaR results with the models being even more closely matched. The same models that were the top performers in VaR comparison also perform significantly better in ES estimation compared to other models.

Full Text: “Ranking of VaR and ES Models: Performance in Developed and Emerging Markets”