Gain/Loss Spread

biddick 2009.03.06 14:27 #1

biddick 2009.03.06 14:40 #2

biddick 2009.03.06 14:42 #3

biddick 2009.03.06 14:46 #4

This is Prof's link: SSRN-The Gain-Loss Spread: A New and Intuitive Measure of Risk by Javier Estrada

Abstract:

The standard deviation, arguably the most widely-used measure of risk, suffers from at least two limitations. First, the number itself offers little insight; after all, what is the intuition behind the square root of the average quadratic deviation from the arithmetic mean return? Second, investors tend to associate risk more with bad outcomes than with volatility. To overcome these limitations, this article introduces a new measure of risk, the gain-loss spread (GLS), which is both intuitive and based on magnitudes that investors consider relevant when assessing risk. The evidence reported below shows that the GLS is highly correlated with the standard deviation, thus providing basically the same information about risk; and more correlated to mean returns than both the standard deviation and beta, thus providing a tighter link between risk and return

Testing Report - Algorithmic Bollinger Bands - Trend Bollinger Bands - Trend

biddick 2009.03.06 14:48 #5

So is this idea is feasible to currency pairs?İs it possible to make a volatility indicator based on above idea? Suggestions are welcome.