THE CONDITIONAL RELATIONSHIP BETWEEN PORTFOLIO BETA AND RETURN: EVIDENCE FROM LATIN AMERICA
Using the approach of Pettengill et al. (1995), we analyze the un-conditional versus conditional cross-sectional CAPM relationship between portfolio beta-risk and return in the Argentinean, Brazilian, Chilean, and Mexican stock markets. We develop extensions to the original model to control for extr...
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| Autores principales: | , |
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| Lenguaje: | English |
| Publicado: |
Instituto de Economía, Pontificia Universidad Católica de Chile
2004
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| Acceso en línea: | http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212004012200003 |
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| Sumario: | Using the approach of Pettengill et al. (1995), we analyze the un-conditional versus conditional cross-sectional CAPM relationship between portfolio beta-risk and return in the Argentinean, Brazilian, Chilean, and Mexican stock markets. We develop extensions to the original model to control for extra risk factors documented in the empirical literature: size, book-to-market ratio and momentum. The paper also presents the first testing of the market integration hypothesis among the Latin American stock markets. The results show that the conditional CAPM is a dominant approach even after controlling for risk factors different from beta. Statistically significant asymmetries are found, however, in the beta-risk premium between up and down markets. Additional findings suggest that the degree of stock market integration among Latin American markets falls during downturns |
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