A New Method for Evaluating a Portfolio’s Downside Risk


Authors: Charles Gabriel and Mark Huamani

We introduce a measure of downside risk which estimates a portfolio's exposure to short-term, market-wide price declines in equity markets.  We examine our measure in the context of three major stock market downturns and find that (a) there is a wide dispersion in equity funds' reaction to downturns and (b) the measure predicts funds' reactions up to nine months ahead.

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The Journal of Performance Measurement

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