Implications of downside beta in Asian markets
Chong, Yao Long
Xu, Cheng Cheng
Date of Issue2010
College of Business (Nanyang Business School)
This paper extends the research by Post, Vliet and Lansdorp (2009) to Singapore, South Korea, Hong Kong and Taiwan on the appropriateness of using downside beta as a measure of systematic risk. Contrary to what is found in the previous study on the US market, our findings suggest that the explanatory power of downside beta to the stock returns in these markets is weak. This may be due to the positive skewness of stock returns in emerging markets in Asia. In addition, sorting stocks by downside beta does not lead to the capturing of additional priced risk than sorting on regular market beta. This result remains consistent after controlling for abnormal stock returns in the calendar month of January.
Final Year Project (FYP)
Nanyang Technological University