The Downside Risk and Equity Evaluation: Emerging Market Evidence

Jianguo Chen and Dar-Hsin Chen
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Jianguo Chen: Department of finance, Bankingand Property, College of Business, Massey University, Palmerston North, New Zealand
Dar-Hsin Chen: Department of Banking and Finance, Tamkang University, Tamsui, Taiwan

Journal of Emerging Market Finance, 2004, vol. 3, issue 1, 77-93

Abstract: In this paper we employ several risk measures to evaluate the equity returns in emerging markets. We focus on a downside risk approach, in particular, with shortfall probability, expected shortfall, downside variance and downside deviation. Our results show that return variance is important in explaining the same-period return. When the risk measure is used to predict future risk premium, the relative-to-zero downside variance (deviation) is a better measure than the total variance (deviation). This new risk measure is not only aligned with people's normal risk sense, but also consistent with the available information in portfolio management.

Keywords: Downside risk; emerging market; semistandard deviation; CAPM; beta; modern portfolio theory; risk measure (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:3:y:2004:i:1:p:77-93

DOI: 10.1177/097265270400300105

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