PRAAMS InvestWatch: white paper
  • InvestWatch -- intro
  • PRAAMS Ratio
  • Return factors
    • Valuation
    • Performance
    • Analyst view (stocks)
    • Market view (bonds)
    • Profitability
    • Growth
    • Dividends (stocks) and Coupons (bonds)
  • Risk factors
    • Default risk
    • Volatility (market risk under normal conditions)
    • Stress-test (market risk under stress conditions)
    • Selling difficulty / Liquidity
    • Country risks
    • Other risks
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  1. Risk factors

Stress-test (market risk under stress conditions)

This metric is similar to the previous one, except it focuses more on the stress-condition market risk metrics such as stress risk and CVaR and stability of trading volumes, again adjusted for market-cap and sector effects and trading history length. The highest score of 7 (i.e., very high stress-market risk relative to peers) means the abnormally fat left tail of return distribution and significantly above-average probability of sudden price falls.

For bonds, the same credit score and liquidity adjustments are applied, though a harsher set of scenarios is used.

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Last updated 12 months ago