Advances in Risk Management

EMANUELE BORGONOVO AND MARCO PERCOCO 63

Table 3.4DIMs by sector and strategy

Sector Strategy

Uniform change Proportional change Optimal strategy

Manufacturing 0.353857 −0.050542 0.346473
Financial services 0.158929 0.000389 0.088251
Tcom and ICT 0.273164 0.7499 0.077969
Energy 0.070564 0.147101 0.318412
Others 0.143486 0.153151 0.168886

Manufacturing

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Financial Tcom and ICT

services

Energy Others

Uniform change

Proportional change

Optimal strategy

Figure 3.4DIM by sector, absolute values

both the sign and magnitude of the impact of a given stock and by ranking
stocks according to that impact.
In all the previous cases,Dprovides the importance of a single asset in
inducing changes in volatility. However, it allows also finding the aggre-
gate importance in a straightforward way. More precisely, having equations
(3.24) and (3.25) in mind, in the uniform changes case, stocks ranking from
1–10 account for 46 percent of the result, whilst the lowest ranking 10 only
for 18.38 percent. This implies that the former assets are the most important
for the considered strategy.