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Testing the relation between beta and returns in the Athens stock exchange

Author

Listed:
  • Nikolaos G. Theriou
  • Vassilios P. Aggelidis
  • Dimitrios I. Maditinos
  • Željko Ševic

Abstract

Purpose - The purpose of this paper is to examine the relationship between beta and returns in the Athens stock exchange (ASE), taking into account the difference between positive and negative market excess returns' yields. Design/methodology/approach - The data were taken from DataStream database and the sample period consists of 12 years divided into four six-year periods such that the test periods do not overlap. Regression analysis is applied, using both the traditional (unconditional) test procedure and the conditional approach. Findings - The estimation of return and beta without differentiating positive and negative market excess returns produces a flat unconditional relationship between return and beta. However, when using the conditional capital asset pricing model (CAPM) and cross-sectional regression analysis, the evidence tends to support the significant positive relationship in up market and a significant negative relationship in down market. Research limitations/implications - The small number of listed companies in the ASE led to the inclusion of the financial and insurance companies in the sample, and to the formation of a small number of portfolios. The same research methodology could be applied to individual stocks of the ASE and with the exclusion of all financial companies. Originality/value - The results tend to support the existence of a conditional CAPM relation between risk and realized return trade-off.

Suggested Citation

  • Nikolaos G. Theriou & Vassilios P. Aggelidis & Dimitrios I. Maditinos & Željko Ševic, 2010. "Testing the relation between beta and returns in the Athens stock exchange," Managerial Finance, Emerald Group Publishing, vol. 36(12), pages 1043-1056, October.
  • Handle: RePEc:eme:mfipps:v:36:y:2010:i:12:p:1043-1056
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    References listed on IDEAS

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    Cited by:

    1. Pritpal Singh Bhullar & Pradeep K. Gupta, 2016. "Expected and realized stock returns: Evidence from India," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(11), pages 270-278, November.
    2. Rumeysa BILGIN & Eyup BASTI, 2011. "A Test of the Validity of Capital Asset Pricing Model in Istanbul Stock Exchange," EuroEconomica, Danubius University of Galati, issue 30, pages 98-108, November.
    3. repec:pje:journl:article15sumvi is not listed on IDEAS
    4. Dinh, Minh Thi Hong, 2017. "The returns, risk and liquidity relationship in high frequency trading: Evidence from the Oslo stock market," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 30-40.

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