A method for measuring investment risk based on a relative risk - excess revenue model

This paper identifies the shortcomings of variance and semi-variance methods in investment risk measurement and introduces a new model, namely RR-ER (relative risk and excess revenue) model, which takes account of the revenue over expectation problem. Properties of RR-ER model and the consistency between RR-ER model and traditional risk measure model with regard to continuous random variables are discussed. Case analysis is presented to prove the practicality and efficiency of this new method.