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Market Insight - 2012 Year in Review - January 2013

This white paper presents model backtesting results, using RiskManager, for a number of standard risk models applied to fixed income and equity portfolios during the period December 2011 to November 2012.  This is a follow up to a similar exercise published for the 2011 calendar year.  Compared to 2011, this past year has been less dramatic, with all models producing relatively stable forecasts.  In terms of risk forecast performance, comparing ex-ante forecasts with ex-post returns, we find that most of the models produced acceptable forecasts for fixed income and equity portfolios, with some overstatement of risk from the most long-dated model.