VAR restrictions ‘will hit returns’ for sophisticated traders
VAR cap can be even more constraining than a short-selling ban, researchers find
Restricting value-at-risk curbs traders’ returns in both rising and falling markets, with a particularly sharp impact in volatile markets, researchers have found. And, in volatile markets, the impact for traders with access to high-value information is potentially worse than imposing a short-selling ban.
“A manager with the capacity of obtaining higher-quality information, such as sophisticated investors (big banks and financial institutions with good forecasting and risk management departments
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