Beta and return: One-day effect

M Feinberg () and Damir Tokic
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M Feinberg: College of Business Administration, University of Texas-Pan American

Journal of Asset Management, 2002, vol. 3, issue 1, No 7, 67-72

Abstract: Abstract This study presents two extreme single-day drops in stock prices due to systematic risk shocks to the market: the Asian crisis of 1st September, 1998, and the 11th September, 2001, terrorist attack. The results show that on both dates, stocks with higher betas decreased relatively more in a single day than stocks with lower betas. Similarly, stocks with higher betas are found to increase relatively more in a single-day rise in the stock market than stocks with lower betas. Several additional single-day extreme returns validate these findings. Therefore, it is argued that beta is a valid measure of systematic risk in a single-day setting. The empirical findings of this paper have important implications for individual investors in their financial planning efforts.

Keywords: beta; systematic risk; extreme returns; market shocks; CAPM; size effect (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1057/palgrave.jam.2240066

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