What is Drawdown

The decline in net asset value from the highest historical point. Often expressed as a percentage loss.

Individual drawdown is any losing period during an investment record.

Maximum drawdown is the largest percentage loss an investor could have realized during a period. It measures the pain an investor may feel if the loss recurs. Comparisons must be made using similar time periods, as maximum drawdown will be greater as measurement frequency interval becomes smaller. It will also be greater for a longer time series, potentially disadvantaging managers with longer track records.

Uninterrupted drawdown calculates the length and severity of an uninterrupted drop.

Recovery time or drawdown duration is the time taken to recover to the prior level.

For more information, see all articles on: Uncategorized

See also:
  • Risk Adjusted Return Measures
  • Performance Evaluation Issues Related to Hedge Funds
  • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

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