DOWNSIDE AND UPSIDE RISK BASED CAPM: EMPIRICAL EVIDENCE FROM BOMBAY STOCK EXCHANGE
Keywords:
Downside Risk, Upside Risk, CAPM, BSEAbstract
The importance of downside risk was highlighted in many studies as the traditional CAPM was contradicted by various researchers stating that the beta is not the sole measure of risk. Hence, an attempt has been made in the present study to test the downside and upside risk based CAPM in the Indian stock market i.e. Bombay Stock Exchange (BSE). The downside and upside measures for estimating risk premium are significantly priced but the model cannot be validated as the result obtained was mixed and inconclusive in the Indian stock market.
References
A. Asthana and S. S. Ahmed, “Empirical Testing of Capital Asset Pricing Model using Generalized Method of Moments in Context of Bombay Stock Exchange”, Indian Journal of Natural Sciences, 14(77), 2023.
A. Asthana, S. S. Ahmed, and A. Tiwari, “Empirical Evidence on the Validity of the Unconditional Higher Moment CAPM in the Bombay Stock Exchange”, Asian Journal of Economics, Business and Accounting, 24(5), 2024, pp. 146–153.
A. Asthana, S. S. Ahmed, and A. Tiwari, “Empirical Evidence on the Validity of the Conditional Higher Moment CAPM in the Bombay Stock Exchange”, Journal of Economics, Management and Trade, 30(4), 2024, pp. 37–45.
A. Rutkowska-Ziarko and L. Markowski, “Accounting and Market Risk Measures of Polish Energy Companies,” Energies, 15(6), p. 2138, Mar. 2022, doi: 10.3390/en15062138.
A. Rutkowska-Ziarko and L. Markowski, “Market and Accounting Risk Factors of Asset Pricing in the Classical and Downside Approaches,” h, 54(2), p. 103, Jun. 2020, doi: 10.17951/h.2020.54.2.103-112.
A. Rutkowska-Ziarko, “Market and Accounting Measures of Risk: The Case of the Frankfurt Stock Exchange,” Risks, 10(1), p. 14, Jan. 2022, doi: 10.3390/risks10010014.
A. Rutkowska-Ziarko, L. Markowski, C. Pyke, and S. Amin, “Conventional and downside CAPM: The case of London stock exchange,” Global Finance Journal, 54, p. 100759, Nov. 2022, doi: 10.1016/j.gfj.2022.100759.
D. Johansson, “Beta Based Portfolio Construction: Stock Selection based on Upside and Downside market risk”, Master thesis.
D. W. H. Alrabadi, A. A. Alwaked, N. S. Al-Qadi, and I. A.-H. Bakhit, “Downside Risk and Stock Returns: The Case of Amman Stock Exchange,” Jordan Journal of Business Administration, 18(2), 2022.
Guy, “Upside and Downside Beta Portfolio Construction: A different approach to risk measurement and portfolio construction”.
H. Ali, “Does downside risk matter more in asset pricing? Evidence from China,” Emerging Markets Review, 39, pp. 154–174, 2019, doi: 10.1016/j.ememar.2019.05.001.
J. Estrada, “Mean-semivariance behavior: Downside risk and capital asset pricing,” International Review of Economics & Finance, 16(2), pp. 169–185, Jan. 2007, doi: 10.1016/j.iref.2005.03.003.
J. Estrada, “Systematic risk in emerging markets: the D-CAPM,” Emerging Markets Review, 3(4), pp. 365–379, Dec. 2002, doi: 10.1016/S1566-0141(02)00042-0.
K. Okyere-Boakye and B. O’Malley, “Downside CAPM: The case of South Africa,” J. econ. financ. sci., 9(2), pp. 578–608, Dec. 2017, doi: 10.4102/jef.v9i2.60.
M. Akbar, “The Myth of Downside Risk Based CAPM: Evidence from Pakistan,” 4(6), 2012.
M. Tahir, Q. Abbas, S. M. Sargana, U. Ayub, and S. K. Saeed, “An Investigation of Beta and Downside Beta Based CAPM-Case Study of Karachi Stock Exchange,” SSRN Journal, 2013, doi: 10.2139/ssrn.2241416.
R. V. Ivanov, “The Downside and Upside Beta Valuation in the Variance-Gamma Model,” International Journal of Analysis and applications, 19(3), 2021, 319-340.
Rashid and F. Hamid, “Downside risk analysis of returns on the Karachi Stock Exchange,” Managerial Finance, 41(9), pp. 940–957, Sep. 2015, doi: 10.1108/MF-09-2014-0245.
S. A. Rasool, A. K. Kiani, and N. Jehan, “The Myth of Downside Risk Based Capital Asset Pricing Model: Empirical Evidence from South Asian Countries,” GSSR, 3(3), pp. 265–280, Sep. 2018, doi: 10.31703/gssr.2018(III-III).15.
U. Ayub, S. Kausar, U. Noreen, M. Zakaria, and I. A. Jadoon, “Downside Risk-Based Six-Factor Capital Asset Pricing Model (CAPM): A New Paradigm in Asset Pricing,” Sustainability, 12(17), p. 6756, Aug. 2020, doi: 10.3390/su12176756.
Y. Konchitchki, Y. Luo, M. L. Z. Ma, and F. Wu, “Accounting-based downside risk, cost of capital, and the macroeconomy,” Rev Account Stud, 21(1), pp. 1–36, Mar. 2016, doi: 10.1007/s11142-015-9338-7.
Zaremba and A. Czapkiewicz, “Digesting anomalies in emerging European markets: A comparison of factor pricing models,” Emerging Markets Review, 31, pp. 1–15, Jun. 2017, doi: 10.1016/j.ememar.2016.12.002.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Akash Asthana, Syed Shafi Ahmed, Anjana Tiwari (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
