Hanson, S.; Pesaran, M.H.; Schuermann, T. - Faculty of Economics, University of Cambridge - 2005
assumptions regarding the structure of systematic risk and the nature of exposure or firm heterogeneity. We derive fat … further risk reduction is possible by changing the portfolio weights. In either case, neglecting parameter heterogeneity can … heterogeneity can lead to overestimation of risk, whether measured by unexpected loss or value-at-risk. …