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| Author: | Zijl, T. van |
| Title: | Risk decomposition : variance or standard deviation - a reexamination and extension. |
| Journal: | Journal of Financial and Quantitative Analysis
1987 : JUN, VOL. 22:2, p. 237-247 |
| Index terms: | RISK MEASUREMENT |
| Language: | eng |
| Abstract: | We investigate and generalize the work of Ben Horim and Levy, which argued that risk decomposition should be based on standard deviation instead of variance. Their work demonstrated that decomposition of variance is wrong if beta is negative. Moreover, the usual method yields incorrect estimates when of undiversifiable risks. Our article shows that these conclusions also apply to the no-risk-free asset extended CAPM if risk is adjusted for the unavoidable risk associated with the global minimum variance portfolio. |
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