The Properties of Downside Risk Measures

35 Pages Posted: 9 Oct 2005

See all articles by Carsten Breitmeyer

Carsten Breitmeyer

University of Muenster

Hendrik Hakenes

Finance Group; Centre for Economic Policy Research (CEPR)

Andreas Pfingsten

University of Münster - Finance Center Münster

Date Written: March 2001

Abstract

A close formal relationship between poverty measurement and the measurement of downside risk was established by Breitmeyer et al. (1999). Moreover, they show that well-known requirements for poverty measures can motivate reasonable properties of downside risk measures, too. We build on their work by transforming a number of poverty measures into (new) downside risk measures. Also, we test these measures (as well as some previously suggested ones) with respect to their axioms. This sometimes is a tedious task, but is simplified considerably for decomposable measures for which we prove some fairly general features. A table summarizes the tests and can serve as a useful tool for anybody who is concerned with downside risk, e.g. risk managers, investors or regulators.

Keywords: risk measures, downside risk, poverty measurement, shortfall risk

JEL Classification: D81, G11, G20, I32

Suggested Citation

Breitmeyer, Carsten and Hakenes, Hendrik and Pfingsten, Andreas, The Properties of Downside Risk Measures (March 2001). Available at SSRN: https://ssrn.com/abstract=812850 or http://dx.doi.org/10.2139/ssrn.812850

Carsten Breitmeyer

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

Hendrik Hakenes

Finance Group ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49-228-73-9225 (Phone)

HOME PAGE: http://www.finance.uni-bonn.de/hakenes

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Andreas Pfingsten (Contact Author)

University of Münster - Finance Center Münster ( email )

Universitätsstr. 14-16
Muenster, D-48143
Germany

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