Measuring Downside Risk – Realized Semivariance*

Ole E. Barndorff‐Nielsen, Silja Kinnebrock and Neil Shephard

in Volatility and Time Series Econometrics

Published in print March 2010 | ISBN: 9780199549498
Published online May 2010 | e-ISBN: 9780191720567 | DOI:

Series: Advanced Texts in Econometrics

 Measuring Downside Risk – Realized Semivariance*

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A number of economists have wanted to measure downside risk, the risk of prices falling, just using information based on negative returns. This has been operationalized by quantities such as semivariance, value at risk and expected shortfall, which are typically estimated using daily returns. This chapter introduces a new measure of the variation of asset prices based on high frequency data, called realized semivariance (RS). Its limiting properties are derived, relating it to quadratic variation and, in particular, negative jumps. It is shown that it has some useful properties in empirical work, enriching the standard ARCH models pioneered by Rob Engle over the last 25 years and building on the recent econometric literature on realized volatility.

Keywords: realized semivariance; ARCH models; downside risk; asset prices; volatility

Chapter.  9028 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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