Average drawdown risk reduction and risk tolerances

The evidence shows that skewness does not impose any significant problem on the n-degree A-DRM model. Moreover, the effect of changing the tolerances of average drawdown risk in the n-degree A-DRM models is a reduction in the fund returns. The n-degree CA-DRM optimization model reduces investors׳ risk more than other models. Thus, the A-DRM can be accommodated with risk-averse investors׳ approach. The efficient set of mean-variance choices from the investment opportunity set, as described by Markowitz, shows that the n-degree CA-DRM algorithms create this set with lower risk than other algorithms. It implies that the mean-variance opportunity set generated by the n-degree CA-DRM creates lower risk for a given return than covariance and CLPM.