Existing studies of household stock trading using administrative data offer conflicting results: discount brokerage accounts exhibit excessive trading, while retirement accounts show inactivity. This paper uses population-wide data from PSID and SCF to examine the overall extent of household...

We examine the impact of adding a Value-at-Risk (VaR) constraint to the problem of an active manager who seeks to outperform a benchmark while minimizing tracking error variance (TEV) by using the model of Roll (1992). We obtain three main results. First, portfolios on the constrained mean-TEV...

We examine the impact of adding either a VaR or a CVaR constraint to the mean-variance model when security returns are assumed to have a discrete distribution with finitely many jump points. Three main results are obtained. First, portfolios on the VaR-constrained boundary exhibit (K 2)-fund...

We examine the economic implications arising from a bank using a VaR-constrained mean-variance model for the selection of its trading portfolio as a consequence of the Basle Capital Accord. Surprisingly, we show that when a VaR constraint is imposed, it is plausible that certain banks will end...

When identifying optimal portfolios, practitioners often impose a drawdown constraint. This constraint is even explicit in some money management contracts such as the one recently involving Merrill Lynch' management of Unilever's pension fund. In this setting, we provide a characterization of...

We relate Value at Risk (VaR) to mean-variance analysis and examine the economic implications of using a mean-VaR model for portfolio selection. When comparing two mean-variance efficient portfolios, the higher variance portfolio might have less VaR. Consequently, an efficient portfolio that...

Developed here is a value at risk-based measure of portfolio performance called the reward-to-VaR ratio. It is demonstrated that, under normality, the reward-to-VaR ratio gives the same ranking for portfolio performance as the frequently used Sharpe ratio. Under non-normality, the reward-to-VaR...

The issue of estimation risk is of particular interest to the decision-making processes of portfolio managers who use long-short investment strategies. Accordingly, our paper explores the question of whether a VaR constraint reduces estimation risk when short sales are allowed. We find that such...

Financial intermediaries often use stress testing to set risk exposure limits. Accordingly, we examine a model with an agent who faces stress testing constraints and another who does not. Three results are obtained. First, when there are K* binding constraints, the constrained agent's optimal...

Most investors delegate the management of a fraction of their wealth to portfolio managers who are given the task of beating a benchmark. However, in an influential paper [Roll, R., 1992. A mean/variance analysis of tracking error. Journal of Portfolio Management 18, 13-22] shows that the...