Textbook Practice Question Reading 25, page 198 Q8 - D
Why VaR will be larger over a month than over a day? i.e. why volatility is higher over a month than a day?
1) As a month is longer than a day, shouldn't it have a longer period for mean reversion than over a day? For example, Company A's stock price could drop a lot due to some sudden negative noises re. the company; however noises might lose their effect after a few weeks
2) VaR (95%) = 1.65σ - μ. For short term, μ=0 while μ≠ 0 for longer term. Therefore for a positive return, longer term also has the chance to have lower VaR?
