Systematic Risk Changes, Negative Realized Excess Returns and Time-Varying CAPM Beta

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F15%3A10281363" target="_blank" >RIV/00216208:11230/15:10281363 - isvavai.cz</a>
Result on the web
<a href="http://journal.fsv.cuni.cz/mag/article/show/id/1322" target="_blank" >http://journal.fsv.cuni.cz/mag/article/show/id/1322</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Systematic Risk Changes, Negative Realized Excess Returns and Time-Varying CAPM Beta
Original language description
We make two methodological modifications to the method of testing CAPM beta and we show that these significantly affect inferences about the association between CAPM beta and stock returns. While the conventional beta proxy is indeed largely unrelated torealized stock returns (in fact the relationship is slightly negative), using forward-looking beta and eliminating unrealistic assumptions about expected market returns makes it (highly) significant. In addition, we show that complementary empirical factors - size and ratio of book-to-market value of equity - that are sometimes presented as potential remedies to beta's deficiencies do not seem to outperform beta. This suggests that weak empirical support for CAPM beta is likely caused by complicationswith implementing CAPM rather than by the weakness of the underlying concept.
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AE - Management, administration and clerical work
OECD FORD branch
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2015
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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