Bertrand Candelon

Maastricht University

Netherlands

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Bertrand Candelon created these companion sites

Backtesting Value-at-Risk: A GMM Duration-based Test
Abstract
This paper proposes a new duration-based backtesting procedure for VaR forecasts. The GMM test framework proposed by Bontemps (2006) to test for the distributional assumption (i.e. the geometric distribution) is applied to the case of the VaR forecasts validity. Using simple J-statistic based on the moments defined by the orthonormal polynomials associated with the geometric distribution, this new approach tackles most of the drawbacks usually associated to duration based backtesting procedures. First, its implementation is extremely easy. Second, it allows for a separate test for unconditional coverage, independence and conditional coverage hypothesis (Christoffersen, 1998). Third, Monte-Carlo simulations show that for realistic sample sizes, our GMM test outperforms traditional duration based test. Besides, we study the consequences of the estimation risk on the duration-based backtesting tests and propose a sub-sampling approach for robust inference derived from Escanciano and Olmo (2009). An empirical application for Nasdaq returns confirms that using GMM test leads to major consequences for the ex-post evaluation of the risk by regulation authorities.
Colletaz, G., B. Candelon, C. Hurlin, and S. Tokpavi, "Backtesting Value-at-Risk: A GMM Duration-based Test", Journal of Financial Econometrics, 9(2), 314-343 .
Authors: Candelon
Colletaz
Hurlin
Tokpavi
Coders: Colletaz
Candelon
Hurlin
Tokpavi
Last update
06/28/2012
Ranking
55
Runs
23
Visits
291
Network Effects and Infrastructure Productivity in Developing Countries
Abstract
This paper proposes to investigate the threshold effects of the productivity of infrastructure investment in developing countries within a panel data framework. Various speci.cations of an augmented production function that allow for endogenous thresholds are considered. The overwhelming outcome is the presence of strong threshold effects in the relationship between output and private and public inputs. Whatever the transition mechanism used, the testing procedures lead to strong rejection of the linearity of this relationship. In particular, the productivity of infrastructure investment generally exhibits some network effects. When the available stock of infrastructure is very low, investment in this sector has the same productivity as non-infrastructure investment. On the contrary, when a minimumnetwork is available, the marginal productivity of infrastructure investment is generally largely greater than the productivity of other investments. Finally, when the main network is achieved, its marginal productivity becomes similar to the productivity of other investment.
Candelon, B., G. Colletaz, and C. Hurlin, "Network Effects and Infrastructure Productivity in Developing Countries", Maastricht University.
Authors: Candelon
Colletaz
Hurlin
Coders: Candelon
Colletaz
Hurlin
Last update
03/14/2013
Ranking
35
Runs
414
Visits
431
Currency Crises Early Warning Systems: why they should be Dynamic
Abstract
This paper introduces a new generation of Early Warning Systems (EWS) which takes into account the dynamics, i.e. the persistence in the binary crisis indicator. We elaborate on Kauppi and Saikonnen (2008), which allows to consider several dynamic specifications by re- lying on an exact maximum likelihood estimation method. Applied so as to predict currency crises for fifteen countries, this new EWS turns out to exhibit significantly better predic- tive abilities than the existing models both within and out of the sample, thus vindicating dynamic models in the quest for optimal EWS.
Candelon, B., E. Dumitrescu, and C. Hurlin, "Currency Crises Early Warning Systems: why they should be Dynamic", Maastricht University.
Authors: Candelon
Dumitrescu
Hurlin
Coders: Candelon
Dumitrescu
Hurlin
Last update
06/04/2012
Ranking
45
Runs
64
Visits
112
How To Evaluate an Early Warning System? Towards a unified Statistical Framework for Assessing Financial Crises Forecasting Methods
Abstract
This paper proposes an original and unified toolbox to evaluate financial crisis Early Warning Systems (EWS). It presents four main advantages. First, it is a model-free method which can be used to asses the forecasts issued from different EWS (probit, logit, markov switching models, or combinations of models). Second, this toolbox can be applied to any type of crisis EWS (currency, banking, sovereign debt, etc.). Third, it does not only provide various criteria to evaluate the (absolute) validity of EWS forecasts but also proposes some tests to compare the relative performance of alternative EWS. Fourth, our toolbox can be used to evaluate both in-sample and out-of-sample forecasts. Applied to a logit model for twelve emerging countries we show that the yield spread is a key variable for predicting currency crises exclusively for South-Asian countries. Besides, the optimal cut-off correctly allows us to identify now on average more than 2/3 of the crisis and calm periods.
Candelon, B., E. Dumitrescu, and C. Hurlin, "How To Evaluate an Early Warning System? Towards a unified Statistical Framework for Assessing Financial Crises Forecasting Methods", IMF Economic Review, 60.
Authors: Candelon
Dumitrescu
Hurlin
Coders: Candelon
Dumitrescu
Hurlin
Last update
07/23/2012
Ranking
34
Runs
24
Visits
269