Managerial Implications of Value at risk

• It is a framework where portfolio managers maximize their expected utility

under asymmetric information, It is introduced as one of the most common
restrictions (VaR constraints) faced by portfolio managers and provide an
analytical solution to this complex problem.
• Analyzing this solution with realistic values of parameters and comparing with
the solution to a similar problem.
• In volatile market, the VaR constraint will have a stronger impact than the short-
selling restriction on the manager performance. In this situation, aggressive
managers will be more affected by the VaR constraint. While the short-selling
restriction tends to evenly affect all managers, the VaR restriction has a stronger
impact on managers with good information quality.
• These results suggest that sophisticated investors will see their performance
more affected by VaR constraint than short-selling restriction.