Item

Short-horizon regulation for long-term investors

Shi,Z.
; 
Werker,B.J.M.
Abstract
We study the effects of imposing repeated short-horizon regulatory constraints on long-term investors. We show that Value-at-Risk and Expected Shortfall constraints, when imposed dynamically, lead to similar optimal portfolios and wealth distributions. We also show that, in utility terms, the costs of imposing these constraints can be sizeable. For a 96% funded pension plan, both an annual Value-at-Risk constraint and an annual Expected Shortfall constraint can lead to an economic cost of about 2.5–3.8% of initial wealth over a 15-year horizon.
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Date
2012
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Tilburg University Research Output Collection
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Keywords
SDG 1 - No Poverty, SDG 10 - Reduced Inequalities
Citation
Shi, Z & Werker, B J M 2012, 'Short-horizon regulation for long-term investors', Journal of Banking & Finance, vol. 36, no. 12, pp. 3227-3238. https://doi.org/10.1016/j.jbankfin.2012.04.009
URI
https://hdl.handle.net/20.500.14602/58062
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