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Murphy diagrams: forecast evaluation of expected shortfall

Motivated by the Basel 3 regulations, recent studies have considered joint forecasts of Value-at-Risk and Expected Shortfall. A large family of scoring functions can be used to evaluate forecast performance in this context. However, little intuitive or empirical guidance is currently available, whic...

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Bibliographic Details
Main Authors: Ziegel, Johanna (Author) , Krüger, Fabian (Author) , Jordan, Alexander I. (Author)
Format: Book/Monograph Working Paper
Language:English
Published: Heidelberg University of Heidelberg, Department of Economics May 12, 2017
Series:Discussion paper series / University of Heidelberg, Department of Economics no. 632
In: Discussion paper series (no. 632)

DOI:10.11588/heidok.00022950
Subjects:
Arbeitspapier
Graue Literatur
Online Access:Resolving-System, kostenfrei, Volltext: http://dx.doi.org/10.11588/heidok.00022950
Resolving-System, kostenfrei, Volltext: http://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-229502
Resolving-System, kostenfrei, Volltext: https://doi.org/10.11588/heidok.00022950
Resolving-System, kostenfrei, Volltext: http://hdl.handle.net/10419/162975
Verlag, kostenfrei, Volltext: http://archiv.ub.uni-heidelberg.de/volltextserver/22950/
Verlag, kostenfrei, Volltext: http://archiv.ub.uni-heidelberg.de/volltextserver/22906/1/bell_hattlebakk_2017_dp631.pdf
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Author Notes:Johanna F. Ziegel; Fabian Krueger; Alexander Jordan; Fernando Fasciati
Description
Summary:Motivated by the Basel 3 regulations, recent studies have considered joint forecasts of Value-at-Risk and Expected Shortfall. A large family of scoring functions can be used to evaluate forecast performance in this context. However, little intuitive or empirical guidance is currently available, which renders the choice of scoring function awkward in practice. We therefore develop graphical checks (Murphy diagrams) of whether one forecast method dominates another under a relevant class of scoring functions, and propose an associated hypothesis test. We illustrate these tools with simulation examples and an empirical analysis of S&P 500 and DAX returns.
Physical Description:Online Resource
DOI:10.11588/heidok.00022950

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