Relationship between semi-variance and return of Tehran Stock Exchange listed companies

Samira Sameni Malayeri


Phenomenon of risk and its measurement is one of the most discussible discussions in financial theories. . Risk can be defined as the possibility that an event will occur, which will impact an organization's achievement of priorities and objectives. In order to quantify the risk exposure probability, different criteria have been used so far within which variance is one of the most popular criteria among all proposed quantitative risk criteria. However, we tried to demonstrate that criteria of semi-variance of return could be more suitable criterion based on following rational reasons. First the investors don’t hate from desirable changes of return, but they hate from undesirable changes. Second, in both symmetrical and unsymmetrical return distribution, semi-variance can depict investment risk concept directly. Considering the latter case and the novelty of the proposed researches in Iran, this study is focused on the relationship between semi-variance and return. In this regards, we studied 27 companies during 5 years duration (2008-2012) and after analyzing the information and we have further calculated the correlation coefficient, in 95% interval. Finally, according to the obtained results we concluded that there is an inverse relationship between semi-variance and return which approves promising use of semi-variance for risk measurement instead of using variance, because semi-variance can at least state risk concept as variance.


Downside risk, Variance, Semi-variance, Downside beta, Return.

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