Ex-Post Risk

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.

RELATED TERMS
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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. How much variance should an investor have in an indexed fund?

    Learn more about the significance of variance in index funds, its value as a measure of volatility and other common analytical ... Read Answer >>
  4. What is the difference between standard deviation and variance?

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  5. Is there a positive correlation between risk and return?

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