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An Examination of Risk-Return Relationship in Bull and Bear Markets Using Time-Varying Betas

Published online by Cambridge University Press:  06 April 2009

Son-Nan Chen
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Extract

Security behavior in bull and bear markets has received some attention in recent years. Fabozzi and Francis [5] first documented evidence that security betas are not influenced by the alternating forces of bull and bear markets. Their subsequent study of mutual fund betas also indicated that mutual funds generally respond indifferently to bull and bear market conditions. Using the concept of bull and bear market variations, Kim and Zumwa1t [9] developed and tested the risk premiums associated with the upside and the downside portions of returns variation. They concluded that investors expect to receive a risk premium for downside risk and pay a premium for upside variation of returns. From their results, Kim and Zumwalt [9] suggested that the down-market beta measuring downside risk (downside variation of returns) may be a more appropriate measure of portfolio risk than the single beta in the market model.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 17 , Issue 2 , June 1982 , pp. 265 - 286
Copyright
Copyright © School of Business Administration, University of Washington 1982

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References

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