Document Type : Research Paper

Authors

• S.M Shariat Panahi
• J. Ebadi
• M. Peimani

Abstract

Maximizing of wealth or better say, end of period expected utility is the main goal of investors. But because of uncertainty of price changes, investors act in an unsafe environment and any risk reduction will redound to decreasing in expected return. Because of this, determining of the best measure of risk is so important in finance.
There are many measures to quantify risk of investment. In this paper, we compare some of these measures of risk based on their ability to predict return in various time horizons. Therefore, four measure of risk (standard deviation, mean absolute deviation, semi standard deviation and value at risk) are selected from common and downside risk family and their abilities to forecasting return in one, two and three months periods are examined. Our analysis method is panel regression and results are conducted based on R-squared and nested regressions method. Our sample contains 66 Tehran Stock Exchange listed companies in time period of 1383 to 1387. Our results depict that semi standard deviation and value at risk have a better performance especially in one month prediction.

Keywords

• Risk
• Return
• Forecasting
• Standard deviation
• Semis standard deviation
• MAD
• VaR