DRAWDOWN MEASURES AND RETURN MOMENTS

Philipp M. Möller ()
Additional contact information
Philipp M. Möller: Chair of Finance, Georg-August-Universität Göttingen, Platz der Göttinger Sieben 3, Göttingen 37075, Germany

International Journal of Theoretical and Applied Finance (IJTAF), 2018, vol. 21, issue 07, 1-42

Abstract: This paper provides an investigation of the effects of an investment’s return moments on drawdown-based measures of risk, including Maximum Drawdown (MDD), Conditional Drawdown (CDD), and Conditional Expected Drawdown (CED). Additionally, a new end-of-period drawdown measure is introduced, which incorporates a psychological aspect of risk perception that previous drawdown measures had been unable to capture. While simulation results indicate many similarities in the first and second moments, skewness and kurtosis affect different drawdown measures in radically different ways. Thus, users should assess whether their choice of drawdown measure accurately reflects the kind of risk they want to measure.

Keywords: Risk measures; drawdown; moments; regret; exponential Lévy process; normal inverse Gaussian process; autocorrelation (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024918500425
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:21:y:2018:i:07:n:s0219024918500425

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024918500425

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().