From poverty measurement to the measurement of downside risk

It is well known that a close relation between the measurement of inequality and the measurement of risk exists. We demonstrate a similar relation between measures of poverty and downside risk, respectively. Based on properties of poverty measures, a number of axioms for reasonable downside risk measures is suggested and applied to the class of decomposable indices, which includes the lower partial moments as special cases. In a more general perspective, the paper enables those interested in measuring the downside risk of distributions to build upon the wealth of literature on poverty measurement when looking for suitable indices.