An examination of the cross-sectional relationship of beta and return in international stock returns: evidence from emerging and developed markets

• Author(s): Spierts, Joshua Patrick
• Date: 2018
• Persistent ID: http://hdl.handle.net/10362/36551
• Origin: Repositório Institucional da UNL
• Subject(s): Risk-return relationship; Unconditional; Conditional; Time-varying betas; Domínio/Área Científica::Ciências Sociais::Economia e Gestão
• Document Type: Master thesis
• Language: English
• Advisor(s): Boons, Martijn; Sampaio, Joelson Oliveira
• Contributor(s): RUN

Description

This paper will follow Pettengill et al.’s (1995) approach to examine the unconditional and conditional relationship between beta and returns from January 1995 to May 2017 in a well globally diversified sample of 22 emerging markets and 23 developed markets. Additionally, Pettengill et al.’s (1995) methodology is adjusted to take into account 1-year time-varying beta values to supplement and check the robustness of the initial results. The empirical results for the full sample as well as both sub-samples indicate that there is no significant unconditional relationship between beta and returns, however, when differentiating between up- and downmarkets a significant conditional relationship is found. This paper adds to the existing literature by examining and comparing a large sample of both developed and emerging markets, as well as, confirming the results according to Pettengill et al.’s methodology with time-varying betas.