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Downside ratio question

HH
Hawk H 4209 апреля 26 г. | Опубликовано в Общая

Good Morning!

I am trying to further understand what a negative downside capture ratio truly means. For example if an ETF market category declines by 15% and the actual ETF shows a negative downside ratio of -3.71, is that favorable to the category decline of 15% .

It would be appreciated to see the math as outlined above.

Thanks,

Hawk H

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DS
Dmitry Shevchenko09 апреля 26 г.
Hi, a negative downside capture ratio means the fund tends to gain when the market goes down. For example, if during negative months the benchmark down 4% on average and during the same months the fund is up 1% on average, it’s downside capture is -25%
HH
Hawk H 42

-2 мес.

OKAY thanks for the explanation. Here’s one more specific ETF example.

ETF IALT shows 54 upside and -112 downside. Can you explain those figures versus the market and timing of the figure as you mentioned above “months of”. I’m trying to understand what timeframe the information represents.

Thanks again for your additional clarification 👍

Hawk H

DS
Dmitry Shevchenko

-2 мес.

It means that in months when the market was up, IALT captured only 54% of its gains. But during months when the market was down, IALT tended to be positive (gained more than the market lost).

That said, IALT has a very short trading history, so I'd treat the numbers as preliminary. We calculate alpha, beta, and R using daily returns, and capture ratios using monthly to align with industry standards. It’d be best to have a year or two of trading data before calling the ratios stable.

Let me know if you have further questions.

HH
Hawk H 42

-2 мес.

Thank you for the detailed explanation. One (hopefully) final question regarding the alpha, beta and r values. What length of time are those based on (monthly, yearly…). How frequently would I see a pattern change within these values?

Best regards,

Hawk H

DS
Dmitry Shevchenko

-2 мес.

The values are updated daily and take all available data since inception into account. So for a recent ETF, it might be less than a year of data. For older ETFs, that can be more than a decade. The older a fund, the more stable the calculated value is (given the benchmark is chosen correctly). For new ETFs, the calculated value can drift quite significantly over time.
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