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PRIX – A risk index for global private investors

Author

Listed:
  • Sebastian Stöckl
  • Michael Hanke
  • Martin Angerer

Abstract

Purpose - The purpose of this paper is to create a universal (asset-class-independent) portfolio risk index for a global private investor. Design/methodology/approach - The authors first discuss existing risk measures and desirable properties of a risk index. Then, they construct a universal (asset-class-independent) portfolio risk measure by modifying Financial Turbulence of Kritzman and Li (2010). Finally, the average portfolio of a representative global private investor is determined, and, by applying the new portfolio risk measure, they derive thePrivate investorRiskIndeX. Findings - The authors show that this index exhibits commonly expected properties of risk indices, such as proper reaction to well-known historical market events, persistence in time and forecasting power for both risk and returns to risk. Practical implications - A dynamic asset allocation example illustrates one potential practical application for global private investors. Originality/value - As of now, a risk index reflecting the overall risk of a typical multi-asset-class portfolio of global private investors does not seem to exist.

Suggested Citation

  • Sebastian Stöckl & Michael Hanke & Martin Angerer, 2017. "PRIX – A risk index for global private investors," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 18(2), pages 214-231, March.
    • Handle: RePEc:eme:jrfpps:jrf-09-2016-0118
    DOI: 10.1108/JRF-09-2016-0118
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    Citations

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    Cited by:

    1. Gächter, Martin & Geiger, Martin & Stöckl, Sebastian, 2020. "Credit intermediation and the transmission of macro-financial uncertainty: International evidence," Journal of International Money and Finance, Elsevier, vol. 108(C).

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