Talk:Downside risk

Recent changes
As User:Brianmarc pointed out on his talk page, I am not an expert on the topic of downside risk. He kindly pointed me to a few papers, namely Nawrocki and the papers by Brian Rom and Kathleen Ferguson. I have only just read the one by Nawrocki, but even with only that I feel that there should at least be a civil discourse as the what should be in this page.

As the page currently reads it is a stub that only gives a definition. So it should either be expanded or deleted. Personally I think expansion is the way to go. Assuming that is the direction that the community at large decides to take, I have a few comments as to what I think should be in this article and welcome input.

"Risk is the likelihood of losses resulting from events such as changes in market prices." (Horcher 'Essentials of financial risk management')

"The most commonly used downside risk measures are the semivariance (special case) and the lower partial moment (general case). The major villain in the downside risk measure debate is the variance measure as used in mean-variance optimization" (Nawrocki 'A Brief History of Downside Risk Measures')

Additionally, in the way that Nawrocki describes the history of downside risk measurement, I think a short section on this could be useful, but might be better suited for post-modern portfolio theory. I don't know.

Finally, I think at least a mention of deviation risk measures and risk measures should be given, since many risk measures (such as value at risk and average value at risk) are downside risk measures (in that they define the risk of losses below some threshold, given by a percentage). And deviation risk measures should be mentioned since they define risk that can correspond to both standard deviation as well as the lower semi-deviation. Although I haven't checked this I believe that lower partial moments are also deviation risk measures, but that would need to be verified.

I propose a structure of the article that goes along the lines of:
 * Basic definition (general heading) defining downside risk, a mention of it's benefits for practitioners/mention of post-modern portfolio theory, and a quick discussion of how it can be measured (risk measures, semideviation, lower partial moment, etc)
 * Examples
 * Brief History

What do you think? Zfeinst (talk) 06:53, 16 February 2012 (UTC)


 * Hi, Zfeinst. As you've seen, I've restored the previously cited content as well as reformatting Brianmarc's addition so that his reference was listed properly.  This was done in an attempt to relieve the "Cite error" warning and not as an endorsement of any particular version of the article.  I see you have already pointed Brianmarc to this discussion and I've left him a message as well.  Thanks for all your help.  Tide  rolls  07:17, 16 February 2012 (UTC)