This study analyzes various measures of the downside beta of stocks. Downside beta is sometimes defined and estimated in different ways. Theoretically, an approach based on the mean-semi-variance equilibrium model appears superior. Two known alternative approaches are not consistent with the...

Betas are used in many applications ranging from asset pricing tests, cost of capital estimation, investment management and risk management. Beta needs to be estimated, and to reduce estimation error, shrinkage to its cross-sectional average value of one is often applied. Since beta is the...