TY  - JOUR
AU  - Ang,Andrew
AU  - Chen,Joseph
AU  - Xing,Yuhang
TI  - Downside Risk
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11824
PY  - 2005
Y2  - December 2005
UR  - http://www.nber.org/papers/w11824
L1  - http://www.nber.org/papers/w11824.pdf
N1  - Author contact info:
Andrew Ang
Columbia Business School
3022 Broadway 413 Uris
New York, NY 10027
Tel: 212/854-9154
Fax: 212/662-8474
E-Mail: aa610@columbia.edu

Joseph Chen
Graduate School of Management
University of California, Davis
One Shields Avenue
3216 Gallagher Hall
Davis, CA 95616-8609
Tel: (530) 752-7155
Fax: (530) 752-2924
E-Mail: chenjs@ucdavis.edu

Yuhang Xing
Rice University
Jones School of Management, MS 531
Rice  University
6100 Main Street
Houston, TX 77004
Tel: 7133484167
E-Mail: yxing@rice.edu
AB  - Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside market movements. We show that the cross-section of stock returns reflects a premium for downside risk. Specifically, stocks that covary strongly with the market when the market declines have high average returns. We estimate that the downside risk premium is approximately 6% per annum. The reward for bearing downside risk is not simply compensation for regular market beta, nor is it explained by coskewness or liquidity risk, or size, book-to-market, and momentum characteristics.
ER  -