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A Multivariate Test of a Dual‐Beta CAPM: Australian Evidence
Author(s) -
Faff Robert
Publication year - 2001
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.1540-6288.2001.tb00034.x
Subject(s) - beta (programming language) , capital asset pricing model , econometrics , multivariate statistics , economics , dual (grammatical number) , financial economics , mathematics , statistics , philosophy , computer science , linguistics , programming language
I apply a multivariate one‐step testing procedure to investigate a dual‐beta CAPM. I begin by establishing that there is no statistical relation between beta and returns for the standard CAPM. I then re‐cast the one‐step test to accommodate a dual‐beta CAPM under bull and bear market conditions. When the excess market return is negative (positive), I find strong evidence of a negative (positive) relation between beta and returns. The strength of my results suggests that the success of the model is not crucially dependent on the argument for beta instability.