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An Examination of Cross‐Sectional Realized Stock Returns using a Varying‐Risk Beta Model
Author(s) -
Howton Shelly W.,
Peterson David R.
Publication year - 1998
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.1540-6288.1998.tb01391.x
Subject(s) - equity (law) , econometrics , economics , stock (firearms) , financial economics , beta (programming language) , geography , law , archaeology , political science , computer science , programming language
Using the dual‐beta model of Bhardwaj and Brooks (1993), this study examines the cross‐section of realized stock returns. Bull‐market betas are significantly positively related to returns and, except for some models in January, bear‐market betas are significantly negatively related to returns. These relationships are not lost even after other independent variables, including size, book‐to‐market equity, and an earnings‐price ratio, are added to the cross‐sectional regressions. Book‐to‐market equity is an important factor in bear, but not bull, markets. Size is important in January and in bear markets during February through December.