Beta

Nusret Cakici and Kudret Topyan

Chapter Chapter 4 in Risk and Return in Asian Emerging Markets, 2014, pp 43-58 from Palgrave Macmillan

Abstract: Abstract Financial economics have investigated how beta is associated with stock’s return for many decades. Fama and MacBeth (1973) reported positive relationship between beta and stock returns for the period 1920–1960. Fama and French (1992) reported no relationship, using more recent data. Easley, Hvidkjaer, and O’Hara (2002), on the other hand, reported negative relationship between beta and stock returns. A quick literature survey shows the widespread inconsistency caused on using beta as a return predictor. In addition to that, researchers also struggle with the other controversial issue of whether to tie the underlined associations to risk or mispricing.1 CAPM is an ex-ante model, and needs to have the past information to project the future rate of return. Historical data presents the realized rate of return for a specific past period and this may not be trustable to project the expected future risk.2 Without the availability of ex-ante data, we will never be able to test the CAPM.

Keywords: Stock Return; Abnormal Return; Monthly Return; Financial Firm; Small Stock (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-35907-0_4

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DOI: 10.1057/9781137359070_4

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