Advanced Search
MyIDEAS: Login

The relationships between unsystematic risk, skewness and stock returns during up and down markets

Contents:

Author Info

  • Tang, Gordon Y. N.
  • Shum, Wai Cheong
Registered author(s):

    Abstract

    A recent article published in International Business Review (12 (2003) 109) argues for the usefulness of beta as a measure of risk in international stock markets. The beta-return relationship is significantly positive (negative) when the market excess returns are positive (negative). This paper extends their study further by examining other statistical risk measures. It is well known that stock returns are non-normally distributed with significant skewness and kurtosis. Under the same conditional framework, investors are found not only compensated for bearing beta risk, but also for bearing unsystematic risk, providing evidence that international investors do not hold well-diversified portfolios. Skewness, but not kurtosis, plays a significant role in pricing international stock returns. Investors accept less positive returns for positively skewed portfolios. Total risk is significantly and positively (negatively) related to realized weekly returns during up (down) markets. Our results support previous findings and add that other statistical risk measures are also useful in explaining the cross-sectional variations in international stock returns, and hence, are relevant to portfolio managers.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S096959310300074X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 12 (2003)
    Issue (Month): 5 (October)
    Pages: 523-541

    as in new window
    Handle: RePEc:eee:iburev:v:12:y:2003:i:5:p:523-541

    Contact details of provider:
    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description

    Order Information:
    Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/bibliographic
    Web: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/bibliographic

    Related research

    Keywords: Risk-return Conditional CAPM Beta Skewness International markets;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Dusan Isakov, 1999. "Is beta still alive? Conclusive evidence from the Swiss stock market," The European Journal of Finance, Taylor & Francis Journals, vol. 5(3), pages 202-212.
    2. Berk, Jonathan B, 1995. "A Critique of Size-Related Anomalies," Review of Financial Studies, Society for Financial Studies, vol. 8(2), pages 275-86.
    3. Chan, Louis K C & Hamao, Yasushi & Lakonishok, Josef, 1991. " Fundamentals and Stock Returns in Japan," Journal of Finance, American Finance Association, vol. 46(5), pages 1739-64, December.
    4. Levy, Haim, 1978. "Equilibrium in an Imperfect Market: A Constraint on the Number of Securities in the Portfolio," American Economic Review, American Economic Association, vol. 68(4), pages 643-58, September.
    5. Tang, Gordon Y. N. & Shum, Wai C., 2003. "The conditional relationship between beta and returns: recent evidence from international stock markets," International Business Review, Elsevier, vol. 12(1), pages 109-126, February.
    6. 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.
    7. Scott, Robert C & Horvath, Philip A, 1980. " On the Direction of Preference for Moments of Higher Order Than the Variance," Journal of Finance, American Finance Association, vol. 35(4), pages 915-19, September.
    8. Ball, Ray, 1978. "Anomalies in relationships between securities' yields and yield-surrogates," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 103-126.
    9. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W, 1994. " Contrarian Investment, Extrapolation, and Risk," Journal of Finance, American Finance Association, vol. 49(5), pages 1541-78, December.
    10. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
    11. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
    12. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    13. Pettengill, Glenn N. & Sundaram, Sridhar & Mathur, Ike, 1995. "The Conditional Relation between Beta and Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(01), pages 101-116, March.
    14. Fletcher, Jonathan, 2000. "On the conditional relationship between beta and return in international stock returns," International Review of Financial Analysis, Elsevier, vol. 9(3), pages 235-245.
    15. Fletcher, Jonathan, 1997. "An examination of the cross-sectional relationship of beta and return: UK evidence," Journal of Economics and Business, Elsevier, vol. 49(3), pages 211-221.
    16. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
    17. Jegadeesh, Narasimhan, 1992. "Does Market Risk Really Explain the Size Effect?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(03), pages 337-351, September.
    18. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
    19. Fama, Eugene F & French, Kenneth R, 1996. " The CAPM Is Wanted, Dead or Alive," Journal of Finance, American Finance Association, vol. 51(5), pages 1947-58, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Syed A. Basher & Perry Sadorsky, 2004. "Oil price risk and emerging stock markets," International Finance 0410003, EconWPA.
    2. Yu, Jing-Rung & Lee, Wen-Yi, 2011. "Portfolio rebalancing model using multiple criteria," European Journal of Operational Research, Elsevier, vol. 209(2), pages 166-175, March.
    3. PaweĊ‚ Wnuk Lipinski, 2013. "Portfolio selection models based on characteristics of return distributions," Working Papers 2013-14, Faculty of Economic Sciences, University of Warsaw.
    4. Guermat, Cherif & Freeman, Mark C., 2010. "A net beta test of asset pricing models," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 1-9, January.
    5. Nandha, Mohan & Hammoudeh, Shawkat, 2007. "Systematic risk, and oil price and exchange rate sensitivities in Asia-Pacific stock markets," Research in International Business and Finance, Elsevier, vol. 21(2), pages 326-341, June.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:12:y:2003:i:5:p:523-541. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.