IESE Research Papers,
IESE Business School

Abstract: The most widely-used measure of an asset's risk, beta, stems from an equilibrium in which investors display mean-variance behavior. This behavioral criterion assumes that portfolio risk is measured by the variance (or standard deviation) of returns, which is a questionable measure of risk. The semivariance of returns is a more plausible measure of risk (as Markowitz himself admits) and is backed by theoretical, empirical, and practical considerations. It can also be used to implement an alternative behavioral criterion, mean-semivariance behavior, that is almost perfectly correlated to both expected utility and the utility of mean compound return.

Keywords: downside risk; semideviation; asset pricing

JEL-codes: G12

19 pages, February 25, 2003

Full text files

DI-0492-E.pdf  

Download statistics

• IESE Business School
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Noelia Romero ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:ebg:iesewp:d-0492This page generated on 2024-09-13 22:20:01.