A comparison of VaR and CVaR constraints on portfolio selection with the mean-variance model

被引:220
作者
Alexander, GJ [1 ]
Baptista, AM
机构
[1] Univ Minnesota, Carlson Sch Management, Dept Finance, Minneapolis, MN 55455 USA
[2] George Washington Univ, Sch Business, Dept Finance, Washington, DC 20052 USA
关键词
value-at-risk (VaR); conditional value-at-risk (CVaR); risk management; portfolio choice;
D O I
10.1287/mnsc.1040.0201
中图分类号
C93 [管理学];
学科分类号
12 ; 1201 ; 1202 ; 120202 ;
摘要
In this paper, we analyze the portfolio selection implications arising from imposing a value-at-risk (VaR) constraint on the mean-variance model, and compare them with those arising from the imposition of a conditional value-at-risk (CVaR) constraint. We show that for a given confidence level, a CVaR constraint is tighter than a VaR constraint if the CVaR and VaR bounds coincide. Consequently, a CVaR constraint is more effective than a VaR constraint as a tool to control slightly risk-averse agents, but in the absence of a risk-free security, has a perverse effect in that it is more likely to force highly risk-averse agents to select portfolios with larger standard deviations. However, when the CVaR bound is appropriately larger than the VaR bound or when a risk-free security is present, a CVaR constraint "dominates" a VaR constraint as a risk management tool.
引用
收藏
页码:1261 / 1273
页数:13
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