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Downside beta and the cross section of equity returns: A decade later
Author(s) -
Atilgan Yigit,
Demirtas K. Ozgur,
Gunaydin A. Doruk
Publication year - 2020
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12258
Subject(s) - downside risk , economics , beta (programming language) , equity (law) , econometrics , financial economics , capital asset pricing model , portfolio , computer science , political science , law , programming language
Abstract This study reexamines the relation between downside beta and equity returns in the United States. First, we replicate the 2006 work of Ang, Chen, and Xing who find a positive relation between downside beta and future equity returns for equal‐weighted portfolios of NYSE stocks. We show that this relation doesn't hold after using value‐weighted returns or controlling for various return determinants. We also extend the original sample, add AMEX/NASDAQ stocks or utilize alternative downside beta measures and still find no downside risk premium. We focus on factor analysis results, persistence of downside beta, and various subsamples to understand the economic reasons behind the findings.