Realized Semibetas and International Stock Return Predictability

15 Pages Posted: 2 Sep 2023 Last revised: 18 Nov 2023

See all articles by Diego Amaya

Diego Amaya

Wilfrid Laurier University

Renata Herrerias

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration

Fernando Perez

affiliation not provided to SSRN

Aurelio Vasquez

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration

Date Written: October 10, 2023

Abstract

We decompose traditional betas into semibetas based on the signed covariation between the returns of individual stocks in an international market and the returns of three risk factors: local, global, and foreign exchange. Using high-frequency data, we empirically assess stock return co-movements with these three risk factors and find novel relationships between these factors and future returns. Our analysis shows that only semibetas derived from negative risk factor and stock return downturns command significant risk premia. Global downside risk is negatively priced in the international market and local downside risk is positively priced.

Keywords: Downside risk, Semicovariances, Semibetas, Global and local risk, Cross-sectional return variation, Risk premium, Mexican stock market

Suggested Citation

Amaya, Diego and Herrerias, Renata and Perez, Fernando and Vasquez, Aurelio, Realized Semibetas and International Stock Return Predictability (October 10, 2023). Available at SSRN: https://ssrn.com/abstract=4560084 or http://dx.doi.org/10.2139/ssrn.4560084

Diego Amaya (Contact Author)

Wilfrid Laurier University ( email )

United States

Renata Herrerias

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration ( email )

Rio Hondo No. 1
Progreso Tizapan
Mexico, D.F. 01080
Mexico
+52(55)56284000 x. 6539 (Phone)

HOME PAGE: http://departamentodeadministracion.itam.mx/es

Fernando Perez

affiliation not provided to SSRN ( email )

No Address Available

Aurelio Vasquez

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration ( email )

Rio Hondo No. 1
Col. Tizapan-San Angel, 01000
Mexico

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