The paper 'Managing downside risk of low-risk anomaly portfolios', written by Kim Hyuk-soo of the Department of Computer Science & Engineering (combined master's–doctoral, 9th semester; supervisor: Professor Kim Se-jun) and Professor Kim Se-jun, has been accepted for publication in Finance Research Letters.

The paper presents research results on the investment gains obtainable by using downside risk when asset managers implement a risk-scaling strategy. Managing downside risk well is an important part of asset management, but existing volatility-based methods perform risk scaling without distinguishing between losses and gains. The downside risk-based risk-scaling strategy proposed in this research addresses the practical investment gains obtainable by managing downside risk directly, showing that when the proposed method is applied to low-risk anomaly portfolios it yields statistically significant and markedly greater investment gains than either applying no risk scaling or applying volatility-based risk scaling.

▲ From left: Professor Kim Se-jun (supervisor), Department of Computer Science & Engineering; Kim Hyuk-soo (combined master's–doctoral student)

*This research was carried out with the support of the National Research Foundation of Korea.