We make all decisions in the context of what we know and can envision. However, catastrophes often arise from what we had not known or had not envisioned previously. Approaches that work for addressing what can be envisioned are not useful in preventing catastrophic meltdowns arising from what...

Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all of the policies at the same time. We introduce here a probabilistic approach to examine the consequences of...

This paper investigates the risk-return relations in Chinese equity markets. Based on a TARCH-M model, evidence shows that stock returns are positively correlated with predictable volatility, supporting the risk-return relation in both aggregate and sectoral markets. Evidence finds a positive...

This paper features an analysis of the effectiveness of a range of portfolio diversification strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically-compounded returns, in...

Mean-variance portfolio optimization is more popular than optimization procedures that employ downside risk measures such as the semivariance, despite the latter being more in line with the preferences of a rational investor. We describe strengths and weaknesses of semivariance and how to...

In the financial world, the importance of "downside risk" and "higher moments" has been emphasized, predominantly in developing countries such as Pakistan, for a substantial period. Consequently, this study tests four models for a suitable capital asset pricing model. These models are CAPM's...

The main purpose of this study was to explore the relationship between market and accounting measures of risk and the profitability of companies listed on the Frankfurt Stock Exchange. An important aspect of the study was to employ accounting beta coefficients as a systematic risk measure. The...

Purpose: This study aims to comparatively analyze the systematic, idiosyncratic and downside risk exposure of both Islamic and conventional funds in Pakistan to see which of the funds has higher risk exposure. Design/methodology/approach The study analyzes different types of risks involved in...

We provide empirical evidence of volatility forecasting in relation to asymmetries present in the dynamics of both return and volatility processes. Using recently-developed methodologies to detect jumps from high frequency price data, we estimate the size of positive and negative jumps and...

To keep up with the rather fast-growing interest in the discipline of Behavioral Finance and Economics caused in part by the new realities of the post-200S world, and the realities prevailing over three decades before and leading up to that year- there is a discernible need for the production of...