Out of sample value-at-risk and backtesting with the standardized pearson type-IV skewed distribution
In: Panoeconomicus: naučno-stručni časopis Saveza Ekonomista Vojvodine ; scientific-professional journal of Economists' Association of Vojvodina, Band 60, Heft 2, S. 231-247
ISSN: 2217-2386
This paper studies the efficiency of an econometric model where the
volatility is modeled by a GARCH (1,1) process, and the innovations follow a
standardized form of the Pearson type-IV distribution. The performance of the
model is examined by in sample and out of sample testing, and the accuracy is
explored by a variety of Value-at-Risk methods, the success/failure ratio,
the Kupiec-LR test, the independence and conditional coverage tests of
Christoffersen, the expected shortfall measures, and the dynamic quantile
test of Engle and Manganelli. Overall, the proposed model is a valid and
accurate model performing better than the skewed Student-t distribution,
providing the financial analyst with a good candidate as an alternative
distributional scheme.