The Mismeasurement of Risk

Posted: 19 Oct 2002

See all articles by Mark Kritzman

Mark Kritzman

Windham Capital Management

Don R. Rich

affiliation not provided to SSRN

Abstract

Investors typically measure risk as the probability of a given loss or the amount that can be lost with a given probability at the end of their investment horizons. This view of risk considers only the final result, but investors perceive (or should perceive) risk differently. They are affected by exposure to loss throughout the investment period, not just at its conclusion. We introduce two new ways of measuring risk - within-horizon probability of loss and continuous value at risk - which reveal that exposure to loss is substantially greater than investors normally assume.

Suggested Citation

Kritzman, Mark and Rich, Don R., The Mismeasurement of Risk. Available at SSRN: https://ssrn.com/abstract=316584

Mark Kritzman (Contact Author)

Windham Capital Management ( email )

800 Boylston Street
30th Floor
Boston, MA 02199
United States
6174193900 (Phone)
6172365034 (Fax)

Don R. Rich

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
2,967
PlumX Metrics