Investor Expectations and Systematic Risk

Adam Clements and Michael E. Drew ()

No 129, School of Economics and Finance Discussion Papers and Working Papers Series from School of Economics and Finance, Queensland University of Technology

Abstract: This study refines the estimation of beta risk within the Capital Asset Pricing Model (CAPM) framework. Evidence is provided that the link between ex-ante risk and ex-post returns is strengthened by more accurately reflecting the formation of investor expectations. An adaptive expectations approach is employed as an estimation technique consistent with the behavioural patterns of investors. Finally, the study compares the capability of risk estimates from both the standard CAPM and adaptive expectation methods to account for future asset returns in Australia.

Keywords: Asset Pricing; Adaptive Expectations; Australia. (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2003-01-20

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Persistent link: http://EconPapers.repec.org/RePEc:qut:dpaper:129

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