IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Time-Varying Betas and Cross-Sectional Return-Risk Relation: Evidence from the UK

  • Fraser, P.
  • Hamelink, F.
  • Hoesli, M.
  • MacGregor, B.

The seminal study by Fama and MacBeth (1973) initiated a stream of papers testing for the cross-sectional relation between return and risk. The debate wether beta is a valid measure of risk has been renimated by Fama and French (1992) and subsequent studies. Rather than focusing on exogenous variables that have a larger explanatory power than an asset's beta in cross sectional tests, we assume the matrix of variances-covariances to follow a time varying ARCH process. Using monthly data from the UK market from February 1975 to December 1996, we compare the cross sectional return-risk relations obtained with an unconditional specification for asset's betas to those obtained when the estimated betas are based on an ARCH model. We also investigate the Pettengill, Sundaram and Mathure (1995) approach, which allows a negative cross sectional return-risk relation in periods in which the market portfolio yields a negative return relative to the risk free rate. These tests are also carried out on samples pertaining to a specific month and on samples from which a particular month is removed. Our result suggest that CAPM holds in downward moving markets than in upward moving markets hence beta is a more appropriate measure of risk in bear markets.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Ecole des Hautes Etudes Commerciales, Universite de Geneve- in its series Papers with number 2000.03.

as
in new window

Length: 23 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:ehecge:2000.03
Contact details of provider: Postal: Suisse; Ecole des Hautes Etudes Commerciales, Universite de Geneve, faculte des SES. 102 Bb. Carl-Vogt CH - 1211 Geneve 4, Suisse
Phone: (+ 41 22) 705-8263
Fax: (+ 41 22) 705-8293
Web page: http://www.unige.ch/gsem/
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fth:ehecge:2000.03. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.