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Semivariance decomposition of country-level returns


  • Beach, Steven L.


A 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.

Suggested Citation

  • Beach, Steven L., 2011. "Semivariance decomposition of country-level returns," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 607-623, October.
  • Handle: RePEc:eee:reveco:v:20:y:2011:i:4:p:607-623

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    References listed on IDEAS

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    Cited by:

    1. Tsai, Hsiu-Jung & Chen, Ming-Chi & Yang, Chih-Yuan, 2014. "A time-varying perspective on the CAPM and downside betas," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 440-454.
    2. repec:bla:jtsera:v:38:y:2017:i:4:p:552-590 is not listed on IDEAS
    3. Philip A. Horvath & Amit K. Sinha, 2017. "Asymmetric reaction is rational behavior," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(1), pages 160-179, January.


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