Risk Letter on Drawdown: From a risk measure to an asset allocation strategy

All investors want to maximize their portfolio’s returns while minimizing their risks. But how should you measure ‘risk’? Standard risk measures, such as Volatility or Value-at-Risk (VaR), provide only limited information about the risk your portfolio is exposed to. The most common measure, Volatility, has a number of drawbacks (which we wrote about in a previous Risk Letter [1]), but …