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Beta and return: One-day effect

Author

Listed:
  • M Feinberg

    (College of Business Administration, University of Texas-Pan American)

  • D Tokic

    (Doctoral candidate in Finance at the University of Texas-Pan American)

Abstract

This study presents two extreme single-day drops in stock prices due to systematic risk shocks to the market: the Asian crisis of 1st September, 1998, and the 11th September, 2001, terrorist attack. The results show that on both dates, stocks with higher betas decreased relatively more in a single day than stocks with lower betas. Similarly, stocks with higher betas are found to increase relatively more in a single-day rise in the stock market than stocks with lower betas. Several additional single-day extreme returns validate these findings. Therefore, it is argued that beta is a valid measure of systematic risk in a single-day setting. The empirical findings of this paper have important implications for individual investors in their financial planning efforts.

Suggested Citation

  • M Feinberg & D Tokic, 2002. "Beta and return: One-day effect," Journal of Asset Management, Palgrave Macmillan, vol. 3(1), pages 67-72, July.
  • Handle: RePEc:pal:assmgt:v:3:y:2002:i:1:d:10.1057_palgrave.jam.2240066
    DOI: 10.1057/palgrave.jam.2240066
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