DEFINITION of 'Ex-Post Risk'

A type of risk measurement technique that uses historic returns to predict the riskiness of a certain investment in the future. This type of risk measure is the equivalent of the statistical variance of an asset's returns relative to its mean.

BREAKING DOWN 'Ex-Post Risk'

Using historic returns as a measure of future risk has been a traditional method used by investors to determine the riskiness of a given asset. Ex-post risk is often used in value at risk analysis - a tool used to give investors a best estimate of the maximum amount of loss that they could expect to incur on any given trading day.

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    What Does Ex-Post Mean?

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    Value at Risk (VaR)

    Value at risk, often referred to as VaR, measures the amount of potential loss that could happen in an investment or a portfolio of investments over a given time period.
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RELATED FAQS
  1. Is tracking error a significant measure for determining ex-post risk?

    Before we answer your question, let's first define tracking error and ex-post risk. Tracking error refers to the amount by ... Read Answer >>
  2. How reliable is the mean variance analysis of an investment?

    Learn how mean variance analysis is used to determine the historical volatility of an asset and how future volatility may ... Read Answer >>
  3. Is variance good or bad for stock investors?

    Learn how high variance stocks are good for some investors and how diversified portfolios can reduce variance without compromising ... Read Answer >>
  4. What is the difference between expected return and variance?

    Learn about expected return and variance, the difference between the two measures and how to calculate the expected return ... Read Answer >>
  5. Can a mean variance analysis be done for any investment?

    Learn how mean variance analysis is used in modern portfolio theory to create an optimal mix of assets to maximize return ... Read Answer >>
  6. What types of assets lower portfolio variance?

    Learn what type of assets reduce portfolio variance and how modern portfolio theory uses correlation coefficients. Read Answer >>
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