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Full-Text Articles in Social and Behavioral Sciences
Mutual Fund Performance In A Nonsymmetrical World: A Case For The Upside Deviation, Ladd Kochman, Ravija Badarinathi
Mutual Fund Performance In A Nonsymmetrical World: A Case For The Upside Deviation, Ladd Kochman, Ravija Badarinathi
Ladd Kochman
A mathematical case is made for the upside deviation. When a portfolio's UD is divided by the market's UD, the resulting ratio facilitates another test of positive or negative skewness. However, a grater contribution of the prospective measure is that were DDp/DDm monitors a portfolio's control of downside deviations, UDp/UDm reflects the leverage from upside deviations.
Do Mutual Funds Understate Their Volatility?, Ladd Kochman, Ravija Badarinathi, Randy Goodwin
Do Mutual Funds Understate Their Volatility?, Ladd Kochman, Ravija Badarinathi, Randy Goodwin
Ladd Kochman
It is probably fair to say that the standard deviation, as a measure of total risk, fell out of favor when researchers discovered that diversification makes only systematic risk relevant to investors. Since even small portfolios of 12 to 18 stocks can eliminate as much as 90 percent of a portfolio's unsystematic risk (Evans and Archer, 1968), it is reasonable to think that average and institutional investors alike attach little importance to their holdings' standard deviation. Why then should it matter if mutual funds understate their standard deviations? After all, even grossly understated standard deviations can still overstate the risk …
The Why And How Of Mutual Fund Standard Deviations, Ladd Kochman, Randy Goodwin
The Why And How Of Mutual Fund Standard Deviations, Ladd Kochman, Randy Goodwin
Ladd Kochman
To the interested observer, mutual fund standard deviations raise two tantalizing questions: Are standard deviations relevant when funds, by definition, eliminate the unsystematic component of total risk? and How can two respected giants in the investments field like Fidelity and Morningstar use the same returns, intervals and measurement period for the same fund and end up with glaringly different standard deviations? To answer the question of relevance, we recall Evans and Archer's (1968) argument that as much as 90 percent of a portfolio's unsystematic risk can be diversified away with 12 to 18 stocks. Since that diversifiable risk is a …