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Betas in Up and Down Markets
Author(s) -
Wiggins James B.
Publication year - 1992
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1992.tb01309.x
Subject(s) - capital asset pricing model , economics , beta (programming language) , econometrics , financial economics , index (typography) , sign (mathematics) , risk premium , capital market , systematic risk , mathematics , finance , mathematical analysis , world wide web , computer science , programming language
This paper examines the single‐period Capital Asset Pricing Model/market model assumption of a linear relationship between returns on individual stocks and the market index. For portfolios formed by size, past performance, and historical beta, the results indicate that a specification which conditions beta on the sign of the market risk premium generally provides a better description of monthly cross‐sectional returns. Some theoretical explanations and research implications of the results are discussed.