Measuring downside risk-realised semivariance

Abstract

We propose a new measure of risk, based entirely on downwards moves measured using high frequency data. Realised semivariances are shown to have important predictive qualities for future market volatility. The theory of these new measures is spelt out, drawing on some new results from probability theory.Market frictions; Quadratic variation; Realised variance; Semimartingale; Semivariance