Downside Deviation

Filed Under » ,
Dictionary Says

Definition of 'Downside Deviation'

A measure of downside risk that focuses on returns that fall below a minimum threshold or minimum acceptable return (MAR). It is used in the calculation of a risk measure known as the Sortino Ratio.
Investopedia Says

Investopedia explains 'Downside Deviation'

Standard deviation, the most widely used measure of investment risk, has some limitations, such as the fact that it treats all deviations from the average - whether positive or negative - as the same. However, investors are generally more concerned with negative divergences than positive ones, i.e. downside risk is a bigger concern. Downside deviation resolves this issue by focusing only on downside risk.

Another advantage over standard deviation is that downside deviation can also be tailored to the specific objectives and risk profile of different investors who have various levels of minimum acceptable return.

Search results for

'Downside Deviation'

  • 5 Ways To Rate Your Portfolio Manager

    http://www.investopedia.com/articles/stocks/11/5-ways-to-measure-money-managers.asp
    ... would be adjusted downward. The Sortino ratio, on the other hand, only includes
    the downside deviation. This means only the volatility ...

  • Picking Top-Quality Hedge Funds

    http://www.investopedia.com/articles/mutualfund/09/search-hedge-fund.asp
    ... Downside deviation. These guidelines will help eliminate many of the funds in the
    universe and identify a workable number of funds for further analysis. ...

  • Hedge Funds: Risks | Investopedia

    http://www.investopedia.com/university/hedge-fund/risks.asp
    ... 6%, and Fund B has an average return of 24% with a standard deviation of 12 ... Read
    more about this measure at Introduction To Value At Risk.) Downside Capture In ...

  • How To Convert Value At Risk To Different Time Periods

    http://www.investopedia.com/articles/04/101304.asp
    ... Conclusion Value at risk is a special type of downside risk measure. ... because you
    need to estimate only two factors: average return and standard deviation. ...

  • CFA Level 1 Study Guide - Quantitative Methods - Standard ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/standard-deviation-and-variance.asp
    ... And Market Returns; 2.10 Basic Statistical Calculations; 2.11 Standard Deviation
    And Variance; 2.12 Skew And Kurtosis; 2.13 Basic Probability ...

  • Profiting From The Bollinger Squeeze

    http://www.investopedia.com/articles/technical/04/030304.asp
    ... Description Bollinger Bands employ upper and lower standard deviation bands together ...
    are showing negative divergence, look for a downside breakout, especially ...

  • How To Use The Forex Pure Fade Trade

    http://www.investopedia.com/articles/forex/08/pure-fade-trade.asp
    ... we watched for a full close between the second and first standard deviation bands. ...
    looked to take profit once we hit the second Bollinger band on the downside. ...

  • The Uses And Limits Of Volatility

    http://www.investopedia.com/articles/04/021804.asp
    ... thirds of the time (68.3%), returns should fall within one standard deviation (+/-)
    and 95 ... and magnitude of upside gains is a mirror image of downside losses. ...

  • Monte Carlo Simulation With GBM

    http://www.investopedia.com/articles/07/montecarlo.asp
    ... distributed with expected return (mean) "m" and standard deviation "s". Interestingly ...
    a compounding effect, while price decreases on the downside reduce the base ...

  • Discovering the Absolute-Breadth Index and the Ulcer Index

    http://www.investopedia.com/articles/technical/03/030403.asp
    ... Second, the standard deviation does not distinguish between short or long sequences
    of losses. Investors are only concerned about downside risk (or the ...

Related Articles

Partner Links