Downside Risk and Investment Choice |
| |
Authors: | K S Maurice Tse Jamshed Uppal Mark A White |
| |
Institution: | Indiana University, Bloomington/Indianapolis, IN 47405;Catholic University of America, Washington, DC 20064;University of Virginia, Charlottesville, VA 22903. |
| |
Abstract: | This paper develops an optimal investment strategy for individuals concerned with avoiding the possibility of realizing returns below a predetermined target level within a prescribed period of time. Assuming a Brownian motion process, a model is developed which allows computation of the exact probability of failure. The algorithm and associated comparative statics with respect to the mean and standard deviation of returns, target return, time horizon, and risk-free rate of return are likely to have many useful practical applications. |
| |
Keywords: | |
|
|