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Economic significance of downside risk in developed and emerging markets

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  • Don Galagedera

Abstract

This study examines in the cross-section the association between excess return and systematic risk measured in the downside framework. Two measures of risk in the downside; downside beta and downside co-skewness are investigated. Both downside risk measures perform poorly compared to the CAPM beta in developed markets. In emerging markets there is evidence to suggest that downside co-skewness may be a better measure of risk compared to the CAPM beta and downside beta.

Suggested Citation

  • Don Galagedera, 2009. "Economic significance of downside risk in developed and emerging markets," Applied Economics Letters, Taylor & Francis Journals, vol. 16(16), pages 1627-1632.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:16:p:1627-1632
    DOI: 10.1080/13504850701604060
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    Cited by:

    1. Truong Thi Thu Thuy & Jungmu Kim, 2018. "Sustainability Managed against Downside Risk and the Cost of Equity: Evidence in Korea," Sustainability, MDPI, vol. 10(11), pages 1-18, October.
    2. Yury Dranev & Sofya Fomkina, 2013. "An asymmetric approach to the cost of equity estimation: empirical evidence from Russia," HSE Working papers WP BRP 12/FE/2013, National Research University Higher School of Economics.
    3. Rutkowska-Ziarko, Anna & Markowski, Lesław & Pyke, Christopher & Amin, Saqib, 2022. "Conventional and downside CAPM: The case of London stock exchange," Global Finance Journal, Elsevier, vol. 54(C).
    4. Varvara Nazarova, 2013. "An Empirical Study of Unsystematic Risk Factors in the Capital Asset Pricing Model: the Case of Russian Forestry Sector," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(4), pages 37-56.
    5. Alles, Lakshman & Murray, Louis, 2013. "Rewards for downside risk in Asian markets," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2501-2509.

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