Annualized Downside Deviation

CFA Level III
#1

I’m stuck in calculating downside deviation shown in the cfai text, page 83, vol 5

More specifically, i’m confused in how you get to the third column of exhibit 29. The footnote tells you that (HF return-hurdle rate)^2 is only calculated when fund/index return < hurdle rate which is 0.4167.

THere are couple instances i see where we get a value for column 3 when fund/index return > hurdle

eg. for March (-1/-1.6)>0.4167. why did cfai calculate a value for this month on column 3?

Thanks in advance. Spending too much time trying to figure this out.

#2

it is only calculated when fund return is less than 0.4167

so sum up squares where index returns are -1,-1.6, -1, -1 (which is 8.6348)

#3

i think you mean -1,-1.2, -1, -1. I just don’t understand why -1 is used in March since -1/-1.6>0.4167

#4

I read the foot note wrong. I got it now. Thanks!