What is the consensus on which risk measure to use in measuring portfolio risk? I am researching what is the best risk measure to use in a portfolio construction process for a long/short option-free equity portfolio.
Since the late '90s thru today, it seems that VaR is the dominant risk measure but is losing ground.
VaR is not a coherent measure whereas conditional value-at-risk (CVaR) or expected shortfall meets these normative requirements.
However, Rama Cont et al (2007) argue in "Robustness and sensitivity analysis of risk measurement procedures" that VaR produces more robust procedure for risk measurement.
One would think the debate is settled then. More recent risk research from Jose Garrido (2009) suggests that new families of risk measures be defined such as "complete" and "adapted" which addresses the fact that CVaR does not account for extreme losses with low frequency, and that VaR only accounts for loss severity as opposed to frequency.
Has there been further empirical research that argues for whether to use VaR or CVaR (or some other measure) in the construction of optimal portfolios?