Does the Square-root-of-time Rule lead to adequate Values in the Risk Management? - an actual Analysis
| Authors | |
|---|---|
| Year of publication | 2013 |
| Type | Article in Proceedings |
| Conference | Finanční řízení podniků a finančních institucí. 9th International Scientific Conference Proceedings Part II. |
| MU Faculty or unit | |
| Citation | |
| Field | Economy |
| Keywords | VaR; square-root-of-time rule; risk; autocorrelation; historical simulation |
| Description | Measuring risk always leads to the aspect that a certain time horizon has to be defined. The square-root-of-time rule is a well-known and simple approach to scale risk onto certain holding periods. In addition, the autocorrelation effect is discussed often in theory and practice. This article tries to answer the question, whether the square-root-of-time rule is able to scale risk onto a defined holding period. In this context, a differentiation between price and total return indices is done. In the end, a concrete hint for the possibility to use the square-root-of-time rule shall be given. |
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