Downside Risk

Andrew Ang, Joseph Chen and Yuhang Xing

The Review of Financial Studies, 2006, vol. 19, issue 4, 1191-1239

Abstract: Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside market movements. We show that the cross section of stock returns reflects a downside risk premium of approximately 6% per annum. Stocks that covary strongly with the market during market declines have high average returns. The reward for beasring downside risk is not simply compensation for regular market beta, nor is it explained by coskewness or liquidity risk, or by size, value, and momentum characteristics. (JEL C12, C15, C32, G12) Copyright 2006, Oxford University Press.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (133)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhj035 (text/html)
Access to full text is restricted to subscribers.

Related works:
Journal Article: Downside risk (2005)
Working Paper: Downside Risk (2005)
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:oup:rfinst:v:19:y:2006:i:4:p:1191-1239

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().