This is an excellent and thought-provoking article, as demonstrated by the comments and conversation this has already produced. Clearly, investors need to define their terms more precisely (as Voltaire stated) if this conversation is to be productive. I believe that many of the problems in communication we experience come from a lack of clearly-defined goals. Clients invest to meet their monetary financial goals, not to earn a return that beats an index or a peer group. (And don't even get me started on the notion that benchmarks are an efficient way to invest!) But I digress... clients have a series of monetary goals, such that the purpose of the investment portfolio is to fund a series of regular withdrawals while preserving and perhaps growing the corpus. This has several important implications for investors which are generally ignored. These include inflation, taxes and fees, all of which change the risk/return dynamic that we use. They also affect our so-called risk measures. In the face of consistent withdrawals (which is a characteristic of almost every client portfolio) the third moment (skewness) becomes much more important than the second moment (variance.) To paraphrase one commenter in this conversation: "investors like variance on the upside." We don't want to monetize the market's downside, and so we need to understand more about the pattern of volatility, and not simply the amount of volatility. So, it's the PATTERN of returns that matters most when you're withdrawing money. And it's the ability to meet a client's monetary goals that is the true measure of investment success, making this "liability" the true benchmark. It seems rather silly to debate statistical nuances when we are ignoring the job we have been hired to do. And frankly, it's a failure of our fiduciary duty to replace performance metrics that address only the manager's risk of being fired (i.e. comparisons to indexes and peer groups) with the true metric of success in serving the client: funding the liabilities. We need a different discussion, one that focuses on the clients who put their capital at risk by entrusting it to us to invest. They pay the bills and we work for them. At least we can do the job they hired us to do, and show them clearly that we are helping them to meet their goals with the capital that they have. The academic stuff can wait.