Modified Beta and Cross-Sectional Stock Returns

Previous studies have shown that stock returns bear a premium for downside risk versus upside potential. We develop a new risk measure which scales the traditional CAPM beta by the ratio of the upside beta to the downside beta, thereby incorporating the effects of both upside potential and downside risk. This “modified” beta has substantial explanatory power in standard asset pricing tests, outperforming existing measures, and it is robust to various alternative modeling and estimation techniques.

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Year of publication:	2017
Authors:	Dennis, Steven A. ; Simlai, Prodosh ; Smith, William Steven
Published in:	Growing presence of real options in global financial markets. - United Kingdom : Emerald Publishing, ISBN 978-1-78714-837-6. - 2017, p. 75-104
Subject:	Kapitaleinkommen \| Capital income \| CAPM \| Betafaktor \| Beta risk \| Börsenkurs \| Share price \| Kapitalmarktrendite \| Capital market returns \| Portfolio-Management \| Portfolio selection

Type of publication:	Article
Language:	English
Other identifiers:	10.1108/S0196-382120170000033005 [DOI]
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10015363331