Downside Beta and the Cross-Section of Equity Returns: A Decade Later

European Financial Management, Vol. 26, No. 2, 2020

37 Pages Posted: 20 Sep 2017 Last revised: 3 Mar 2020

See all articles by Yigit Atilgan

Yigit Atilgan

Sabanci University

K. Ozgur Demirtas

Sabanci University Graduate School of Management

A. Doruk Gunaydin

Sabanci University

Multiple version iconThere are 2 versions of this paper

Date Written: September 18, 2016

Abstract

This study reexamines the relation between downside beta and equity returns in the U.S. First, we replicate Ang, Chen and Xing (2006) who find a positive relation between downside beta and future equity returns for equal-weighted portfolios of NYSE stocks. We show that this relation doesn’t hold after using value-weighted returns or controlling for various return determinants. We also extend the original sample, add AMEX/NASDAQ stocks or utilize alternative downside beta measures and still find no downside risk premium. We focus on factor analysis results, persistence of downside beta and various subsamples to understand the economic reasons behind the findings.

Keywords: Downside Beta, Downside Risk, Tail Risk, Equity Returns, Asset Pricing

JEL Classification: G10, G11, G12

Suggested Citation

Atilgan, Yigit and Demirtas, K. Ozgur and Gunaydin, A. Doruk, Downside Beta and the Cross-Section of Equity Returns: A Decade Later (September 18, 2016). European Financial Management, Vol. 26, No. 2, 2020, Available at SSRN: https://ssrn.com/abstract=3038690 or http://dx.doi.org/10.2139/ssrn.3038690

Yigit Atilgan

Sabanci University ( email )

Orta Mahalle Üniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
Turkey

K. Ozgur Demirtas (Contact Author)

Sabanci University Graduate School of Management ( email )

Sabanci University, School of Management
Orhanli Tuzla
Orhanlı-Tuzla, Istanbul, 34956
Turkey
(+90) 216-483-9985 (Phone)
(+90) 216-483-9699 (Fax)

A. Doruk Gunaydin

Sabanci University ( email )

School of Management
Orhanli Tuzla
İstanbul, 34956
Turkey

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