 The effect of downside risk reduction on UK equity portfolios included with Managed Futures FundsKai-Hong Tee International Review of Financial Analysis, 2009, vol. 18, issue 5, 303-310 Abstract: The concept of asymmetric risk estimation has become more widely applied in risk management in recent years with the increased use of Value-at-risk (VaR) methodologies. This paper uses the n-degree lower partial moment (LPM) models, of which VaR is a special case, to empirically analyse the effect of downside risk reduction on UK portfolio diversification and returns. Data on Managed Futures Funds are used to replicate the increasingly popular preference of investors for including hedge funds and fund-of-funds type investments in the UK equity portfolios. The result indicates, however that the potential benefits of fund diversification may deteriorate following reductions in downside risk tolerance levels. These results appear to reinforce the importance of risk (tolerance) perception, particularly downside risk, when making decisions to include Managed Futures Funds in UK equity portfolios as the empirical analysis suggests that this could negatively affect portfolio returns. Keywords: Downside; risk; Value-at-risk; Lower; partial; moment; Managed; Futures; Portfolio; diversification (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:18:y:2009:i:5:p:303-310 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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