@article {Fisher158, author = {Jeffrey D. Fisher and Joseph D{\textquoteright}Alessandro}, title = {Portfolio Upside and Downside Risk{\textemdash}Both Matter!}, volume = {47}, number = {10}, pages = {158--171}, year = {2021}, doi = {10.3905/jpm.2021.1.263}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Traditional performance measures do not distinguish between upside risk and downside risk. Downside risk is based on returns that are below a target rate, below zero, below average, or below a benchmark, and vice versa for upside risk. Downside risk measures and the {\textquotedblleft}duality{\textquotedblright} of beta have been discussed extensively in literature related to public markets but have not been applied to the analysis of private equity real estate in the academic literature. This article examines the measures that can distinguish between upside and downside risk that are commonly used in public markets, such as upside and downside beta and the Sortino ratio for downside analysis, and applies them to different property sectors and Core-Based Statistical Areas in the NCREIF Property Index. In addition, these measures are used to analyze gateway versus nongateway markets{\textquoteright} historical performance on both an upside and downside risk basis. The same techniques are applied to perform an attribution analysis of a portfolio{\textquoteright}s alpha into upside and downside components.Key Findings▪ The authors show that downside risk measures such as the Sortino ratio and downside beta can provide insights into what drives returns for different property sectors and Core-Based Statistical Areas, as well as gateway versus nongateway markets.▪ Using the upside to downside beta ratio, the authors show how property sectors and markets vary as to whether beta is magnifying return on the upside and/or minimizing declines on the downside.▪ By using the duality of beta, the authors show how to decompose the risk-adjusted overperformance or underperformance into upside and downside alpha earned by a portfolio, a complement to traditional Brinson attribution analysis.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/47/10/158}, eprint = {https://jpm.pm-research.com/content/47/10/158.full.pdf}, journal = {The Journal of Portfolio Management} }