This paper analyzes the optimal portfolio and wealth/consumption policies of utility-maximizing investors who manage market-risk exposure using Value-at-Risk (VaR)-based risk management. It finds that VaR risk managers often choose larger exposure to risky assets than non-risk managers, leading to larger losses when they occur. The paper suggests an alternative risk management model based on expected losses to address VaR's shortcomings. A general-equilibrium analysis shows that VaR risk managers amplify stock-market volatility during downturns and reduce it during upturns. The paper also evaluates an alternative risk management model, limited expected losses (LEL), which maintains lower losses when they occur. The results suggest that VaR-based risk management can lead to larger losses than expected, contradicting its purpose. The paper concludes that VaR-based risk management may not be the best approach for managing risk, and that alternative models like LEL may be more effective. The paper also highlights the importance of understanding the economic implications of risk management practices.This paper analyzes the optimal portfolio and wealth/consumption policies of utility-maximizing investors who manage market-risk exposure using Value-at-Risk (VaR)-based risk management. It finds that VaR risk managers often choose larger exposure to risky assets than non-risk managers, leading to larger losses when they occur. The paper suggests an alternative risk management model based on expected losses to address VaR's shortcomings. A general-equilibrium analysis shows that VaR risk managers amplify stock-market volatility during downturns and reduce it during upturns. The paper also evaluates an alternative risk management model, limited expected losses (LEL), which maintains lower losses when they occur. The results suggest that VaR-based risk management can lead to larger losses than expected, contradicting its purpose. The paper concludes that VaR-based risk management may not be the best approach for managing risk, and that alternative models like LEL may be more effective. The paper also highlights the importance of understanding the economic implications of risk management practices.