TY - JOUR T1 - Navigating Stock Price Crashes JF - The Journal of Portfolio Management SP - 28 LP - 37 DO - 10.3905/jpm.2016.42.4.028 VL - 42 IS - 4 AU - B. Korcan Ak AU - Steven Rossi AU - Richard Sloan AU - Scott Tracy Y1 - 2016/05/31 UR - https://pm-research.com/content/42/4/28.abstract N2 - Individual equity securities are prone to large and abrupt stock price drops. In this article, the authors provide a framework for measuring, forecasting, and avoiding such stock price crashes. First, the authors identify the events that most frequently cause stock prices to crash, and then they construct a parsimonious model for forecasting stock price crashes. Finally, they examine how positioning a portfolio to reduce exposure to stocks with high crash risk can improve investment performance. This article provides a framework that should help investors construct equity portfolios with fewer stock price crashes, higher returns, and lower volatility.TOPICS: Financial crises and financial market history, risk management, portfolio management/multi-asset allocation ER -