CAPM in Up and Down Markets

Jianhua Zhang and Clas Wihlborg
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Jianhua Zhang: Jianhua Zhang, Department of Economics, School of Business, Economics and Law, University of Gothenburg, Sweden. E-mail: jianhua.zhang@economics.gu.se

Journal of Emerging Market Finance, 2010, vol. 9, issue 2, 229-255

Abstract: The pricing of equity in six European emerging capital markets is analysed using both the conventional CAPM and a ‘conditional’ CAPM wherein up and down markets are separated. International influences on the stock markets are also analysed. The empirical evidence from a sample of 1,131 firms from the six markets indicates that there exists a significant relationship between beta and returns when up and down markets are separated. The international CAPM performs well in some markets that have become increasingly integrated with the world market. The general implication of the analysis is that beta can be a useful risk-measure for investors and portfolio managers considering investments in emerging markets.

Keywords: JEL Classification: G12; JEL Classification: G15; Asset pricing; risk premium; cost of capital; emerging markets (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:9:y:2010:i:2:p:229-255

DOI: 10.1177/097265271000900205

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