Abstract:This paper sheds light on the evaluation of portfolio risk by assuming a distribution capable of incorporating the behaviour of most financial variables, especially at the tails: the so called Edgeworth-Sargan distribution. This density is preferable over other distributions, such as the Student's t, when fitting high frequency financial variables, because of its flexibility for improving data fits by adding more parameters in a natural way.Furthermore, this distribution is easy to be generalised to a multivariate context and, therefore, correlation coefficients among variables can be estimated efficiently. This article thus provides new insights into VaR methodology by estimating the joint density of portfolio variables, and by calculating the right critical values of the underlying portfolio density as well. The empirical examples include the estimation and evaluation of different volatility and weight scenarios for portfolios composed of stock indices and interest rates for major financial markets.
This study develops a model in order to study in depth the relationship between investment and firm value. This model is estimated by using panel data methodology, obtaining results for Spanish firms. These results indicate a direct but inversely proportional relationship between the volume of investment and firm value. In addition, the empirical evidence shows that the creation of value persists over the long run, although no distinction is found between firms that announce their investments (divestments) and those that do not. When investment opportunities are introduced into the analysis, results indicate that the creation of value is greater for those firms with valuable investment opportunities. Finally, our results corroborate the free cash flow theory, since there is a decrease in value for investing firms with a high level of free cash flow.
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