Downside beta and equity returns around the world
Atılgan, Yiğit and Bali, Turan G. and Demirtaş, Özgür and Günaydın, Ali Doruk (2018) Downside beta and equity returns around the world. Journal of Portfolio Management, 44 (7). pp. 39-54. ISSN 0095-4918 (Print) 2168-8656 (Online)
Official URL: https://dx.doi.org/10.3905/jpm.2018.1.080
In this article, the authors investigate the relation between downside beta and stock returns in a global context using more than 170 million daily return observations. Contrary to the findings in the U.S. equity market, they find that downside beta does not explain the cross-sectional differences in future and contemporaneous returns in an international setting. The results are robust to using different methods to estimate downside beta, omitting the U.S. stocks from the global sample, utilizing alternative global pricing factors, and replicating the analysis for various country groupings. The empirical results of this article overturn the heavily cited finding on the relation between downside beta and equity returns.
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