TY - JOUR T1 - Risk by Any Other Name JF - The Journal of Alternative Investments SP - 83 LP - 86 DO - 10.3905/jai.2003.83 VL - 6 IS - 2 AU - David J Gordon Y1 - 2003/09/30 UR - https://pm-research.com/content/6/2/83.abstract N2 - What quantitative measure of historical risk best helps a hedge fund investor predict the magnitude of future losses? Standard deviation, a simple and well-understood measure of risk, has been used by most hedge fund investors for a long time. However, many investors dismiss return volatility among hedge funds that have only had positive returns as “upside volatility.” These investors believe that historical standard deviation overestimates future risk for funds that have only experienced “upside volatility,” because standard deviation penalizes funds equally for above average and below average returns . These investors look instead to downside risk measures such as historical maximum drawdown and downside deviation as their primary quantitative predictors of future losses. With the right data, the question of which risk measure best predicts future losses is simply an empirical issue. ER -