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Title: The effect of downside risk reduction on UK equity portfolios included with Managed Futures Funds
Authors: Tee, Kai-Hong
Keywords: Downside risk
Lower partial moment
Managed futures
Portfolio diversification
Issue Date: 2009
Publisher: © Elsevier
Citation: TEE, K.-H., 2009. The effect of downside risk reduction on UK equity portfolios included with Managed Futures Funds. International Review of Financial Analysis, 18 (5), pp. 303 - 310
Abstract: The concept of asymmetric risk estimation has become more widely applied in risk management in recent years with the increased use of Value-at-risk (VaR) methodologies. This paper uses the n-degree lower partial moment (LPM) models, of which VaR is a special case, to empirically analyse the effect of downside risk reduction on UK portfolio diversification and returns. Data on Managed Futures Funds are used to replicate the increasingly popular preference of investors for including hedge funds and fund-of-funds type investments in the UK equity portfolios. The result indicates, however that the potential benefits of fund diversification may deteriorate following reductions in downside risk tolerance levels. These results appear to reinforce the importance of risk (tolerance) perception, particularly downside risk, when making decisions to include Managed Futures Funds in UK equity portfolios as the empirical analysis suggests that this could negatively affect portfolio returns. © 2009 Elsevier Inc. All rights reserved.
Description: This article was published in the journal, International Review of Financial Analysis [© Elsevier]. The definitive version is available at: http://dx.doi.org/10.1016/j.irfa.2009.09.007
Version: Submitted for publication
DOI: 10.1016/j.irfa.2009.09.007
URI: https://dspace.lboro.ac.uk/2134/14794
Publisher Link: http://dx.doi.org/10.1016/j.irfa.2009.09.007
ISSN: 1057-5219
Appears in Collections:Published Articles (Business)

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