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Downside risk

delete2006-03-02
delete648
PRE
AI
A
Andrew Ang *
J
Joseph Chen
Y
Yuhang Xing
DOI：10.1093/rfs/hhj035delete
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Abstract

Abstract

En 中文
Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside market movements. We show that the cross section of stock returns reflects a downside risk premium of approximately 6% per annum. Stocks that covary strongly with the market during market declines have high average returns. The reward for beasring downside risk is not simply compensation for regular market beta, nor is it explained by coskewness or liquidity risk, or by size, value, and momentum characteristics.
Keywords:
CROSS-SECTION
CONDITIONAL SKEWNESS
MARKET VALUE
PREFERENCE
AVERSION
RETURNS
STOCKS
CONSUMPTION
MOMENTS
MODELS
AI Summary

AI Summary

Key information extracted from the uploaded paper, including a brief overview, abstract, background, key highlights, visual analysis, and future outlook.

Journal

Review of Financial Studies cover
Review of Financial Studies
IF:
5.4
Papers:
2.8K
Citations:
3.0W

Organization

No organization information available