@article {Qian11, author = {Edward Qian}, title = {On the Holy Grail of {\textquotedblleft}Upside Participation and Downside Protection{\textquotedblright}}, volume = {41}, number = {2}, pages = {11--22}, year = {2015}, doi = {10.3905/jpm.2015.41.2.011}, publisher = {Institutional Investor Journals Umbrella}, abstract = {{\textquotedblleft}Upside participation and downside protection{\textquotedblright} is a popular motto for many investors. It has taken on much more significance in recent years, in the wake of the global financial crisis. But how do we define and evaluate strategies from the perspective of {\textquotedblleft}upside participation and downside protection{\textquotedblright}? In this article, the authors present an analytic framework in which they provide a quantitative definition of upside and downside participation ratio, define participation ratio difference as a goodness measure for defensive strategies, and prove a relationship between the participation ratio difference and traditional alpha. As an illustration, they apply this new analysis to the S\&P 500 Index and its 10 sectors and show that defensive, low-beta sectors tend to have positive participation ratio differences, while cyclical, high-beta sectors tend to have negative participation ratio differences. This finding is consistent with the low-beta/volatility anomaly and provides another explanation for the popularity of low-beta/volatility strategies.TOPICS: Financial crises and financial market history, accounting and ratio analysis, statistical methods}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/41/2/11}, eprint = {https://jpm.pm-research.com/content/41/2/11.full.pdf}, journal = {The Journal of Portfolio Management} }