Semivariance decomposition of country-level returns
AbstractA methodology for decomposing the below-mean semivariance into systematic and unsystematic components is introduced. The decomposition of variance and semivariance of asset returns is presented for forty-four country-level indexes. The proportion of risk explained for country-level returns in the Downside CAPM framework is higher than in the CAPM framework. On average for all markets, global systematic risk, as a proportion of total risk, is 42% in the CAPM and 56% in the Downside CAPM. A strong role for semivariance and downside beta is found in explaining the cross-section of country returns. Although skew is highly correlated to semivariance, no cross-sectional confirmation of the role of skew as a priced risk or in explaining the downside risk is identified.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 20 (2011)
Issue (Month): 4 (October)
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Web page: http://www.elsevier.com/locate/inca/620165
D-CAPM Downside risk Semivariance decomposition Systematic risk;
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