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Economic significance of downside risk in developed and emerging markets

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  • Don Galagedera

Abstract

This study examines in the cross-section the association between excess return and systematic risk measured in the downside framework. Two measures of risk in the downside; downside beta and downside co-skewness are investigated. Both downside risk measures perform poorly compared to the CAPM beta in developed markets. In emerging markets there is evidence to suggest that downside co-skewness may be a better measure of risk compared to the CAPM beta and downside beta.

Suggested Citation

  • Don Galagedera, 2009. "Economic significance of downside risk in developed and emerging markets," Applied Economics Letters, Taylor & Francis Journals, vol. 16(16), pages 1627-1632.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:16:p:1627-1632
    DOI: 10.1080/13504850701604060
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    Cited by:

    1. Truong Thi Thu Thuy & Jungmu Kim, 2018. "Sustainability Managed against Downside Risk and the Cost of Equity: Evidence in Korea," Sustainability, MDPI, vol. 10(11), pages 1-18, October.
    2. Palwishah, Rana & Kashif, Muhammad & Rehman, Mobeen Ur & Al-Faryan, Mamdouh Abdulaziz Saleh, 2024. "Asymmetric liquidity risk and currency returns before and during COVID-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 91(C).
    3. Yury Dranev & Sofya Fomkina, 2013. "An asymmetric approach to the cost of equity estimation: empirical evidence from Russia," HSE Working papers WP BRP 12/FE/2013, National Research University Higher School of Economics.
    4. Rutkowska-Ziarko, Anna & Markowski, Lesław & Pyke, Christopher & Amin, Saqib, 2022. "Conventional and downside CAPM: The case of London stock exchange," Global Finance Journal, Elsevier, vol. 54(C).
    5. Rutkowska – Ziarko, Anna & Markowski, Lesław & Abdou, Hussein A., 2024. "Conditional CAPM relationships in standard and accounting risk approaches," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    6. Varvara Nazarova, 2013. "An Empirical Study of Unsystematic Risk Factors in the Capital Asset Pricing Model: the Case of Russian Forestry Sector," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(4), pages 37-56.
    7. Alles, Lakshman & Murray, Louis, 2013. "Rewards for downside risk in Asian markets," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2501-2509.

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