Professor Jorion's book provides a comprehensive treatment of the concept of Value at Risk, tailored towards the needs of professionals and MBA students. Much emphasis is put on the implementation and use of Value at Risk in a risk management framework as well as the Basel regulations. The book also points the reader toward more advanced topics. The new sections outlining applications of extreme value theory, principal component analysis, copulas and the Basel II rule sets are very welcome additions to the previous editions.The author has divided the treatment of Value at Risk into six parts, all building upon each other.Part I provides an overview of markets and risk factors for financial institutions. The author takes a historical approach to motivate Value at Risk while highlighting several high profile failures and shortcomings of risk management. He also introduces the reader to the evolution of the Basel frameworks. The second and third parts make up the core pieces of the book.Part II, "Building Blocks," provides the reader with techniques to estimate Value at Risk, including nonparametric and parametric methods. The emphasis thereby is always on application-something the target audience will know to appreciate. Professor Jorion also discusses estimation uncertainty and the need for backtesting obtained Value at Risk figures. Drawing from portfolio theory, the impact of correlation/diversification and the modeling of such are addressed. New to the third edition is a section on multivariate models. In particular, dimension reduction techniques such as factor models, principal components and copulas are also outlined.The third part, called "Value-at-Risk Systems," focuses directly on the implementation of Value at Risk as part of risk management. Analytical, marginal and sim-E. Wipplinger ( )
We investigate the risk‐adjusted performance of the aggregate equity holdings and trades of 13,807 active mutual funds located in 16 countries between 2001 and 2014. Using portfolio sorts, we find weak evidence that institutional holdings exhibit positive subsequent risk‐adjusted returns. However, any outperformance is unlikely to stem from short‐term informational advantage: stocks bought do not outperform stocks sold in the subsequent quarter. This finding is robust to regressions of subsequent stock returns on changes in institutional ownership and holds for different measurements of institutional trading.
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