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Betas in Up and Down Markets

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  • Wiggins, James B

Abstract

This paper examines the single-period Capital Asset Pricing Model/market model assumption of a linear relationship between returns on individual stocks and the market index. For portfolios formed by size, past performance, and historical beta, the results indicate that a specification which conditions beta on the sign of the market risk premium generally provides a better description of monthly cross-sectional returns. Some theoretical explanations and research implications of the results are discussed. Copyright 1992 by MIT Press.

Suggested Citation

  • Wiggins, James B, 1992. "Betas in Up and Down Markets," The Financial Review, Eastern Finance Association, vol. 27(1), pages 107-123, February.
    • Handle: RePEc:bla:finrev:v:27:y:1992:i:1:p:107-23
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    Cited by:

    1. Peter Xu & Rich Pettit, 2014. "No-arbitrage conditions and expected returns when assets have different β’s in up and down markets," Journal of Asset Management, Palgrave Macmillan, vol. 15(1), pages 62-71, February.
    2. Max Stevenson, 2001. "Filtering and Forecasting Spot Electricity Prices in the Increasingly Deregulated Australian Electricity Market," Research Paper Series 63, Quantitative Finance Research Centre, University of Technology, Sydney.
    3. Woodward, George & Marisetty, Vijaya B., 2005. "Introducing non-linear dynamics to the two-regime market model: Evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 559-581, September.
    4. Petros Messis & Achilleas Zapranis, 2014. "Asset pricing with time-varying betas for stocks traded on S&P 500," Applied Economics, Taylor & Francis Journals, vol. 46(36), pages 4508-4518, December.
    5. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.
    6. Yaya, OlaOluwa S. & Gil-Alana, Luis A., 2014. "The persistence and asymmetric volatility in the Nigerian stock bull and bear markets," Economic Modelling, Elsevier, vol. 38(C), pages 463-469.
    7. Domian, Dale L. & Louton, David A., 1995. "Business cycle asymmetry and the stock market," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 451-466.
    8. George Woodward & Heather Anderson, 2009. "Does beta react to market conditions? Estimates of 'bull' and 'bear' betas using a nonlinear market model with an endogenous threshold parameter," Quantitative Finance, Taylor & Francis Journals, vol. 9(8), pages 913-924.
    9. Hodoshima, Jiro & Garza-Gomez, Xavier & Kunimura, Michio, 2000. "Cross-sectional regression analysis of return and beta in Japan," Journal of Economics and Business, Elsevier, vol. 52(6), pages 515-533.
    10. Kokoszka Piotr & Miao Hong & Zheng Ben, 2017. "Testing for asymmetry in betas of cumulative returns: Impact of the financial crisis and crude oil price," Statistics & Risk Modeling, De Gruyter, vol. 34(1-2), pages 33-53, June.
    11. Moy, Ronald L. & Lee, Ahyee & Lee, Cheng F., 1995. "Bulls, bears, and value line's rankings," International Review of Economics & Finance, Elsevier, vol. 4(2), pages 179-187.
    12. Prabhdeep Kaur & Jaspal Singh & Sidharath Seth, 2021. "Investigating the Dynamics of Exchange Traded Funds Across the Bear and Bull Markets: Evidence from Indian Equity ETFs," Vision, , vol. 25(3), pages 350-360, September.

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