Practical Applications of On the Holy Grail of “Upside Participation and Downside Protection”

Abstract

If you are passionate about what qualifies as a good defensive strategy and how it relates to the traditional definitions of alpha and beta, or about the benefits of active management, you’ll want to read this report.

In On the Holy Grail of “Upside Participation and Downside Protection” , Eddie Qian , Chief Investment Officer in the Multi-Asset Group at PanAgora Asset Management introduces a new tool, the Participation Ratio Difference (PRD), to measure the level of upside participation relative to downside protection.

How might a strategy prosper when the market is good, while capping the downside when things take a turn for the worse? To answer that question, one must understand what downside protection really means, Qian says.