Abstract
Modern portfolio theory remains the dominant paradigm of financial risk management. Behavioral economics, however, targets one of modern portfolio theory’s greatest pitfalls: its symmetrical view of all deviations from expected return, positive or negative, as if investors viewed excess returns to be as troubling as failures to meet a targeted level of returns. This article evaluates a range of measures designed to gauge financial risk through semideviation or semivariance: the Sortino ratio, Morningside's upside and downside capture ratios, and the omega and kappa measures.
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