Mean-semivariance behavior (II): The D-CAPM

Javier Estrada ()
Additional contact information
Javier Estrada: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

No D/493, IESE Research Papers from IESE Business School

Abstract: For over 30 years academics and practitioners have been debating the merits of the CAPM. One of the characteristics of this model is that it measures risk by beta, which follows from an equilibrium in which investors display mean-variance behavior. In that framework, risk is assessed by the variance of returns, a questionable and restrictive measure of risk. The semivariance of returns is a more plausible measure of risk and can be used to generate an alternative behavioral hypothesis (mean-semivariance behavior), an alternative measure of risk for diversified investors (the downside beta), and an alternative pricing model (the D-CAPM). The empirical evidence discussed in this article for the entire MSCI database of developed and emerging markets clearly supports the downside beta and the D-CAPM over beta and the CAPM.

Keywords: downside risk; semideviation; asset pricing (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003-02-25
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.iese.edu/research/pdfs/DI-0493-E.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0493

Access Statistics for this paper

More papers in IESE Research Papers from IESE Business School IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN. Contact information at EDIRC.
Bibliographic data for series maintained by Noelia Romero ().