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CAPM in Up and Down Markets

Author

Listed:
  • Jianhua Zhang

    (Jianhua Zhang, Department of Economics, School of Business, Economics and Law, University of Gothenburg, Sweden. E-mail: jianhua.zhang@economics.gu.se)

  • Clas Wihlborg

    (Clas Wihlborg, Argyros School of Business and Economics, Chapman University and Department of Finance, Copenhagen Business School. E-mail: wihlborg@chapman.edu)

Abstract

The pricing of equity in six European emerging capital markets is analysed using both the conventional CAPM and a ‘conditional’ CAPM wherein up and down markets are separated. International influences on the stock markets are also analysed. The empirical evidence from a sample of 1,131 firms from the six markets indicates that there exists a significant relationship between beta and returns when up and down markets are separated. The international CAPM performs well in some markets that have become increasingly integrated with the world market. The general implication of the analysis is that beta can be a useful risk-measure for investors and portfolio managers considering investments in emerging markets.

Suggested Citation

  • Jianhua Zhang & Clas Wihlborg, 2010. "CAPM in Up and Down Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(2), pages 229-255, August.
    • Handle: RePEc:sae:emffin:v:9:y:2010:i:2:p:229-255
    DOI: 10.1177/097265271000900205
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    References listed on IDEAS

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    1. Jacek Lipiec, 2016. "Does Warsaw stock exchange value corporate social responsibility?," Social Responsibility Journal, Emerald Group Publishing, vol. 12(3), pages 613-624, August.
    2. Nida SHAH* & Javaid DARS* & Ambreen ZEB**, 2015. "Market Varying Conditional Risk-Return Relationship," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 25(1), pages 25-43.
    3. Hakkı Ozturk & Ayse Altiok Yilmaz, 2015. "Leverage and Stock Returns: Evidence from Istanbul Stock Exchange," Accounting and Finance Research, Sciedu Press, vol. 4(4), pages 140-140, November.

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    More about this item

    Keywords

    JEL Classification: G12; JEL Classification: G15; Asset pricing; risk premium; cost of capital; emerging markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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