A time-varying perspective on the CAPM and downside betas

Hsiu Jung Tsai; Ming Chi Chen; Chih Yuan Yang

doi:10.1016/j.iref.2013.07.006

A time-varying perspective on the CAPM and downside betas

Hsiu Jung Tsai
, Ming Chi Chen^*
, Chih Yuan Yang

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

23 Citations (Scopus)

Abstract

In the current study, we focus on the capital asset pricing model (CAPM) beta and downside betas. The empirical results of market index returns in the international samples of 23 developed countries exhibit significant differences between the CAPM and downside betas, indicating that these models capture distinct risks. Considering autocorrelation variance, the DCC downside betas (HW-beta and HR-beta) more effectively explain the expected stock market returns than does the CAPM beta.

Original language	English
Pages (from-to)	440-454
Number of pages	15
Journal	International Review of Economics and Finance
Volume	29
DOIs	https://doi.org/10.1016/j.iref.2013.07.006
Publication status	Published - 2014 Jan
Externally published	Yes

Keywords

CAPM beta
DCC
Developed countries
Downside beta
Time-varying

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.iref.2013.07.006

Cite this

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title = "A time-varying perspective on the CAPM and downside betas",

abstract = "In the current study, we focus on the capital asset pricing model (CAPM) beta and downside betas. The empirical results of market index returns in the international samples of 23 developed countries exhibit significant differences between the CAPM and downside betas, indicating that these models capture distinct risks. Considering autocorrelation variance, the DCC downside betas (HW-beta and HR-beta) more effectively explain the expected stock market returns than does the CAPM beta.",

keywords = "CAPM beta, DCC, Developed countries, Downside beta, Time-varying",

author = "Tsai, \{Hsiu Jung\} and Chen, \{Ming Chi\} and Yang, \{Chih Yuan\}",

note = "Funding Information: Country Major stock index Australia Australia ASX All-Ordinaries Austria Austria Trading Index (ATX) Belgium Brussels All-Share Price Index Canada Canada S\&P/TSX 300 Composite Denmark OMX Copenhagen All-Share Price Index Finland OMX Helsinki All-Share Price Index France Paris CAC-40 Index Germany Germany DAX Price Index Greece Athens SE General Index Hong Kong Hong Kong Hang Seng Composite Index Ireland Ireland ISEQ Overall Price Index Italy Banca Commerciale Italiana Index Japan Japan Nikkei 225 Stock Average Netherlands Netherlands All-Share Price Index New Zealand New Zealand SE All-Share Capital Index Norway Oslo SE All-Share Index Portugal Oporto PSI-20 Index Singapore Singapore FTSE Straits-Times Index Spain Madrid SE General Index Sweden OMX Stockholm-30 Index Switzerland Swiss Market Index United Kingdom UK Financial Times-SE 100 Index United States Dow Jones Industry Average Appendix II ",

year = "2014",

month = jan,

doi = "10.1016/j.iref.2013.07.006",

language = "English",

volume = "29",

pages = "440--454",

journal = "International Review of Economics and Finance",

issn = "1059-0560",

publisher = "Elsevier Inc.",

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T1 - A time-varying perspective on the CAPM and downside betas

AU - Tsai, Hsiu Jung

AU - Chen, Ming Chi

AU - Yang, Chih Yuan

N1 - Funding Information: Country Major stock index Australia Australia ASX All-Ordinaries Austria Austria Trading Index (ATX) Belgium Brussels All-Share Price Index Canada Canada S&P/TSX 300 Composite Denmark OMX Copenhagen All-Share Price Index Finland OMX Helsinki All-Share Price Index France Paris CAC-40 Index Germany Germany DAX Price Index Greece Athens SE General Index Hong Kong Hong Kong Hang Seng Composite Index Ireland Ireland ISEQ Overall Price Index Italy Banca Commerciale Italiana Index Japan Japan Nikkei 225 Stock Average Netherlands Netherlands All-Share Price Index New Zealand New Zealand SE All-Share Capital Index Norway Oslo SE All-Share Index Portugal Oporto PSI-20 Index Singapore Singapore FTSE Straits-Times Index Spain Madrid SE General Index Sweden OMX Stockholm-30 Index Switzerland Swiss Market Index United Kingdom UK Financial Times-SE 100 Index United States Dow Jones Industry Average Appendix II

PY - 2014/1

Y1 - 2014/1

N2 - In the current study, we focus on the capital asset pricing model (CAPM) beta and downside betas. The empirical results of market index returns in the international samples of 23 developed countries exhibit significant differences between the CAPM and downside betas, indicating that these models capture distinct risks. Considering autocorrelation variance, the DCC downside betas (HW-beta and HR-beta) more effectively explain the expected stock market returns than does the CAPM beta.

AB - In the current study, we focus on the capital asset pricing model (CAPM) beta and downside betas. The empirical results of market index returns in the international samples of 23 developed countries exhibit significant differences between the CAPM and downside betas, indicating that these models capture distinct risks. Considering autocorrelation variance, the DCC downside betas (HW-beta and HR-beta) more effectively explain the expected stock market returns than does the CAPM beta.

KW - CAPM beta

KW - DCC

KW - Developed countries

KW - Downside beta

KW - Time-varying

UR - https://www.scopus.com/pages/publications/84888307135

UR - https://www.scopus.com/pages/publications/84888307135#tab=citedBy

U2 - 10.1016/j.iref.2013.07.006

DO - 10.1016/j.iref.2013.07.006

M3 - Article

AN - SCOPUS:84888307135

SN - 1059-0560

VL - 29

SP - 440

EP - 454

JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

ER -

A time-varying perspective on the CAPM and downside betas

Abstract

Keywords

ASJC Scopus subject areas

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