@article {Lee65, author = {Chi Keong Lee}, title = {Expected Drawdown Management: An Ex-Ante, Long-Term Approach to Portfolio Construction }, volume = {18}, number = {4}, pages = {65--74}, year = {2016}, doi = {10.3905/jwm.2016.18.4.065}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article describes a different approach to constructing portfolios; one based on the investor{\textquoteright}s forward-looking, long-term expectation of peak-to-trough loss from investments (expected drawdown). The argument is made that expectation of the future peak-to-trough loss from an investment should be used as a true measure of risk capital that the investor is committing to the investment. This article further introduces a new metric that quantifi es the investor{\textquoteright}s ex-ante view that two investments will experience their expected drawdowns at the same time (the expected co-drawdown). These two metrics combine into a new portfolio construction methodology (expected drawdown management) allowing investors to optimally construct portfolios based on controlling for the investor{\textquoteright}s expectation of future peak-to-trough loss at the portfolio level.TOPICS: Portfolio construction, risk management}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/18/4/65}, eprint = {https://jwm.pm-research.com/content/18/4/65.full.pdf}, journal = {The Journal of Wealth Management} }