Value-at-Risk Analysis of Stock Returns Historical Simulation,Variance Techniques or Tail Index Estimation?

In this paper various Value-at-Risk techniques are applied to the Dutch stock market index AEX and to the Dow Jones Industrial Average. The main conclusion are: (1) Changing volatility over time is the most important characteristic of stock returns when modelling value-at-risk; (2) For low confidence levels, the fat tails of the distribution can best be mod- eled by means of the t-distribution; (3) Tail index estimators are not successful, due to the fact that they can not cope with the volatility clustering phenomenon.