Symmetric vs. Downside Risk: Does It Matter for Portfolio Choice?

Olga Bourachnikova and Nurmukhammad Yusupov

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: While symmetric measures of risk, such as variance, have been conven- tionally used in ?nance, downside risk measures are arguably more intuitive although computationally more complex to use. Opponents of symmetric risk measures suggest that investors use downside risk approach to invest- ment decisions. In this paper, using French stock market data, we empir- ically test whether the two approaches to portfolio optimization produce signi?cantly di¤erent outcomes. Our results suggest portfolio choice under downside risk and symmetric risk frameworks yield similar results. Our paper contributes to the ongoing debate on the relevance of symmetric vs. downside risk measures.

JEL-codes: G11 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2009-13

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