Downside risk

This mean-semivariance, or downside risk, model is also known as “safety-first” technique, and only looks at the lower standard deviations of expected returns which are the potential losses.

[5] Later in 1970, several focus groups were performed where executives from eight industries were asked about their definition of risk resulting in semi-variance being a better indicator than ordinary variance.

[citation needed] It is important to distinguish between downside and upside risk because security distributions are non-normal and non-symmetrical.

The probability of losses is reflected in the downside risk of an investment, or the lower portion of the distribution of returns.

Studies indicate that "around two-thirds of the time standard beta would underestimate the downside risk.