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Conventional and Downside Betas and Higher Co-moments in the Asset Pricing Relations

In: Contemporary Trends and Challenges in Finance

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  • Lesław Markowski

    (University of Warmia and Mazury)

Abstract

This study examined the cross-sectional relationships between realized returns and systematic risk measures using sub-sectoral indices quoted on Warsaw Stock Exchange. In addition to the classical beta, the aim of the study is also to check the impact of higher order co-moments on the sub-indices pricing. The unconditional risk-return relationships are estimated using classical and downside measures and conditional relations in terms of market condition. The downside risk premiums are significantly positive which means, that the downside risk is priced in Polish stock market. The downside risk measures outperform the classical ones. While the market condition is incorporated as the conditioning variable the risk factors acquire significance. Beta coefficient and co-kurtosis generate positive premiums in the up market and negative in the down market. Using the sub-sector indices returns no significant co-skewness pricing in the up market is found. The research show that measures of systematic risk such as the beta coefficient and higher order co-moments in conventional and downside approach are appropriate risk factors in asset pricing.

Suggested Citation

  • Lesław Markowski, 2020. "Conventional and Downside Betas and Higher Co-moments in the Asset Pricing Relations," Springer Proceedings in Business and Economics, in: Krzysztof Jajuga & Hermann Locarek-Junge & Lucjan T. Orlowski & Karsten Staehr (ed.), Contemporary Trends and Challenges in Finance, pages 55-64, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-43078-8_5
    DOI: 10.1007/978-3-030-43078-8_5
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    Cited by:

    1. 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).

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