The Analysis of Portfolio Risk Management using VAR Approach Based on Investor Risk Preference

Suwarno, Agus and Mahadwartha, Putu Anom (2017) The Analysis of Portfolio Risk Management using VAR Approach Based on Investor Risk Preference. KINERJA: Journal of Business and Economics, 21 (2). pp. 129-144. ISSN 2549-1709

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Abstract

Ackert and Deaves (2010) said that most people have tendency to being risk averse, but with appropriate amount of compensation, people may take more risk. Understanding those circumstances, this research trying to figure risk involved in a Mean-Variance Model. This model has taken consideration about investor risk preference in composed VAR model. VAR define as a measure of the risk of investments, which in this research focuses on risk preferences. This research also conducts comparison between optimum portfolio model known as Single Index Model and Mean-Variance Mode. Robustness test taken too analyze the outcomes from different data input. Research showed that risk preference has an impact on generating portfolio based on Mean-Variance Mode (MVM). Meanwhile, Single Index Model (SIM) found to given a similar result as MVM in high risk preference. This has shown that SIM may not adequate for those who have low risk preference. Research also show that risk taker investor get more gain and endure more risk than risk averse investor. But, based on robustness test, we found that the lowest risk an investor bear is on the highest risk preference. Thus, we make a conclusion that variance is not the only factor that might cause VaR increased, data dispersion has became more major factor. Keywords: Value at risk, Single Index Model, Optimum Portfolio.

Item Type:	Article
Uncontrolled Keywords:	Value at risk, Single Index Model, Optimum Portfolio
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Divisions:	Faculty of Business and Economic > Department of Management
Depositing User:	Ester Sri W. 196039
Date Deposited:	28 Oct 2022 02:36
Last Modified:	28 Oct 2022 02:36
URI:	http://repository.ubaya.ac.id/id/eprint/42801

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