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Australian industry beta risk, the choice of market index and business cycles

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Author Info

  • Vanitha Ragunathan
  • Robert Faff
  • Robert Brooks

Abstract

The paper presents an investigation of the equity beta risk of 23 Australian industry portfolios over the period 1974 to 1992. A comparison of domestic and international market model betas, favours the domestic risk measures, although the international counterparts are generally statistically significant relative to a world market index. Furthermore, the international betas seem to display greater instability than the domestic beta estimates. Tests are made to determine whether business cycles, both domestic and international, impact upon stock returns, via changes in the estimated domestic beta. Generally, it is found that business cycles are important and that the US business cycle has a much larger impact on the equity betas of industry portfolios, than does the Australian business cycle. Finally, it is found that interactions between the business cycles of Australia and the United States, have an impact on the beta risk for many industries.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/096031000331923
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 10 (2000)
Issue (Month): 1 ()
Pages: 49-58

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Handle: RePEc:taf:apfiec:v:10:y:2000:i:1:p:49-58

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Cited by:
  1. Eduardo Roca & Victor Wong & Gurudeo Tularam, 2010. "The Market Sensitivity of Australian Superannuation Socially Responsible Investment Funds. Evidence from a Markov Regime Switching Approach," Discussion Papers in Finance finance:201012, Griffith University, Department of Accounting, Finance and Economics.
  2. Frank Figge, 2004. "Stakeholder und Unternehmensrisiko," Risk and Insurance 0408001, EconWPA.
  3. Yao, Juan & Alles, Lakshman, 2006. "Industry return predictability, timing and profitability," Journal of Multinational Financial Management, Elsevier, vol. 16(2), pages 122-141, April.

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