Arbeitspapier
Portfolio Diversification Effects of Downside Risk
Risk managers use portfolios to diversify away the unpriced risk of individual securities. In this article we compare the benefits of portfolio diversification for downside risk in case returns are normally distributed with the case of fat-tailed distributed returns. The downside risk of a security is decomposed into a part which is attributable to the market risk, an idiosyncratic part, and a second independent factor. We show that the fat-tailed-based downside risk, measured as value-at-risk (VaR), should decline more rapidly than the normal-based VaR. This result is confirmed empirically.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. 05-008/2
- Classification
-
Wirtschaft
- Subject
-
Diversification
Value-at-Risk
Decomposition
Portfolio-Management
Risikomaß
- Event
-
Geistige Schöpfung
- (who)
-
Hyung, Namwon
de Vries, Casper G.
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2005
- Handle
- Last update
- 10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hyung, Namwon
- de Vries, Casper G.
- Tinbergen Institute
Time of origin
- 2005
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