Better Risk Metric for Long-term Investors?

Different risk metrics capture different aspects of risk, and the relative importance of different aspects of risk varies across investors. Widely used risk metrics do not serve the interests of long-term investors because they destroy price series history. Is there a better risk metric for such investors? In the October 2025 draft of their paper entitled “Submergence Intensity: A Contextualized Risk Metric for Long-Term Investing”, Dane Rook and Ashby Monk introduce submergence intensity as a risk metric for long-term investors. They designed this metric to overcome the following shortcomings of existing risk metrics:

1. Many risk metrics reflect either typical/average risk or extreme (tail) risk, but not both.
2. Many risk metrics are insensitive to the order in which returns occur.
3. Many risk metrics are insensitive to asymmetries in returns (positive or negative, or part of a drawdown or a recovery.
4. Most risk metrics critically depend upon a small number of parameters, but these parameters are often not explicit, or not adaptable.
5. Many risk metrics effectively penalize liquid assets and therefore distort relative riskiness of assets.

The authors compare submergence intensity with other risk metrics, and discuss how investors can adapt it to specific preferences. Based on theoretical considerations, they conclude that: (more…)