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Robert Darren Brooks - One of the best experts on this subject based on the ideXlab platform.

  • Conditional Relation between Systematic Risk and Returns in the Conventional and Downside Frameworks: Evidence from the Indonesian Market
    Journal of Emerging Market Finance, 2012
    Co-Authors: Nurjannah, Don Upatissa Asoka Galagedera, Robert Darren Brooks
    Abstract:

    Unconditional pricing models fail to support a positive Risk–return trade-off. When excess market return is negative an inverse relationship between the capital asset pricing model (CAPM) Beta and equal-weighted and value-weighted portfolio return is observed. To accommodate market movement in the pricing model, two volatility regimes (high/low) is delineated by specifying a threshold on conditional market volatility estimated via a generalised autoregressive conditional heteroscedasticity (GARCH) process. In the low volatility regime, the CAPM Beta Risk premium and the downside Beta Risk premium are negative. This observation is robust to the level of the threshold used and is more pronounced in value-weighted portfolios. When the market condition and market movement is incorporated together as conditioning variables, a strong relationship between CAPM Beta and return is uncovered.JEL Classification: G12

  • a test of capm on the karachi stock exchange
    International journal of business, 2008
    Co-Authors: Javed Iqbal, Robert Darren Brooks
    Abstract:

    This study investigates the applicability of the CAPM in explaining the cross section of stock return on the Karachi Stock Exchange for the period September 1992 to April 2006. Unlike earlier studies on emerging markets this study is carried out with a broader scope. Firstly, the tests are conducted on individual stocks as well as size sorted portfolios and industry portfolios. Secondly, the test accounts for the intervalling effect by employing three data frequencies namely daily, weekly and monthly data. Thirdly, keeping in view the infrequent trading prevailing in emerging markets in general and Pakistan's equity markets in particular the test is also carried out on Beta corrected for thin trading, using the Dimson (1979) procedure. Contrary to earlier studies on emerging markets the premium for Beta Risk and the skewness have the expected signs. The Risk return relationship however appears to be non-linear and is most profound in recent years when the market performance, backed by the high level of liquidity and trading activity, was outstanding.

  • Alternative Beta Risk estimators and asset pricing tests in emerging markets: The case of Pakistan
    Journal of Multinational Financial Management, 2007
    Co-Authors: Javed Iqbal, Robert Darren Brooks
    Abstract:

    Abstract This paper tests and compares the applicability of two asset pricing models specifically, the CAPM and the Fama–French three factor models for an emerging stock market namely, Pakistan. The paper analyses a number of Beta Risk estimators, including OLS, the Dimson thin trading estimator, a trade-to-trade estimator and a sample selectivity estimator. To uncover any possible influence of the return interval and the type of the market index, the analysis is carried out on three data frequencies namely daily, weekly and monthly as well as for a value and an equally weighted market index. The alternative Beta estimators appear to correct thin trading bias but their effects on asset pricing tests are not visible. Moreover contrary to the expectations the test results for monthly and weekly frequencies are not promising. Instead for daily data the cross-section of returns are explained by a number of Risk factors and trading volume.

  • Is Systematic Downside Beta Risk Really Priced? Evidence in Emerging Market Data
    SSRN Electronic Journal, 2005
    Co-Authors: Don Upatissa Asoka Galagedera, Robert Darren Brooks
    Abstract:

    Several studies advocating safety first as a major concern to investors propose downside Beta Risk as an alternative to the traditional systematic Risk-Beta. Downside measures are concerned with a subset of the data and therefore the results in the studies that consider the downside Beta only may be biased. This study addresses this issue by including downside co-skewness Risk in addition to the downside Beta Risk in the pricing model. In a sample of 27 emerging markets two-stage rolling regression analysis fails to support pricing models with downside Risk measures. In a cross-sectional analysis inclusion of downside co-skewness improves model fit. When considered together, downside Beta is potential and downside co-skewness is a Risk to the rational investor. Even though our results are inconclusive the evidence strongly suggests a need for further investigation of co-skewness Risk in pricing models that adopt a downside Risk framework.

  • Alternative Beta Risk estimators in cases of extreme thin trading: Canadian evidence
    Applied Financial Economics, 2005
    Co-Authors: Robert Darren Brooks, Robert W. Faff, Tim R. L. Fry, Emawtee Bissoondoyal-bheenick
    Abstract:

    In this paper, an alternative method of estimating the systematic Risk for Canadian stocks is presented and empirically investigated. The method proposed is applied to a set of data impacted by censoring - the presence of zero returns, which occurs in extreme cases of thin trading. The approach used is the sample selectivity model, which is a two-step procedure: with a selectivity component and a regression component. In addition, this study compares the new Beta estimate to the standard OLS Beta and the Dimson Beta. The results indicate that the selectivity-corrected Beta does correct the downward bias of the OLS estimates and possesses desirable statistical properties.

Don Upatissa Asoka Galagedera - One of the best experts on this subject based on the ideXlab platform.

  • Conditional Relation between Systematic Risk and Returns in the Conventional and Downside Frameworks: Evidence from the Indonesian Market
    Journal of Emerging Market Finance, 2012
    Co-Authors: Nurjannah, Don Upatissa Asoka Galagedera, Robert Darren Brooks
    Abstract:

    Unconditional pricing models fail to support a positive Risk–return trade-off. When excess market return is negative an inverse relationship between the capital asset pricing model (CAPM) Beta and equal-weighted and value-weighted portfolio return is observed. To accommodate market movement in the pricing model, two volatility regimes (high/low) is delineated by specifying a threshold on conditional market volatility estimated via a generalised autoregressive conditional heteroscedasticity (GARCH) process. In the low volatility regime, the CAPM Beta Risk premium and the downside Beta Risk premium are negative. This observation is robust to the level of the threshold used and is more pronounced in value-weighted portfolios. When the market condition and market movement is incorporated together as conditioning variables, a strong relationship between CAPM Beta and return is uncovered.JEL Classification: G12

  • Wavelet timescales and conditional relationship between higher-order systematic co-moments and portfolio returns
    Quantitative Finance, 2008
    Co-Authors: Don Upatissa Asoka Galagedera, Elizabeth Ann Maharaj
    Abstract:

    This paper investigates the association between portfolio returns and higher-order systematic co-moments at different timescales obtained through wavelet multi-scaling, a technique that decomposes a given return series into timescales enabling investigation at different return intervals. In Australian industry portfolios, the relative Risk positions indicated by systematic co-moments at some timescales are different from those revealed in daily returns. A strong positive (negative) linear association between Beta and portfolio return and co-kurtosis and portfolio return in the up (down) market is observed in daily returns and at different timescales. The Beta Risk is priced in the up and down markets. Co-kurtosis is not priced when the Beta is in the pricing model. Co-skewness appears to be priced at a relatively high timescale and this is observed only after the up and down separation of market returns.

  • Is Systematic Downside Beta Risk Really Priced? Evidence in Emerging Market Data
    SSRN Electronic Journal, 2005
    Co-Authors: Don Upatissa Asoka Galagedera, Robert Darren Brooks
    Abstract:

    Several studies advocating safety first as a major concern to investors propose downside Beta Risk as an alternative to the traditional systematic Risk-Beta. Downside measures are concerned with a subset of the data and therefore the results in the studies that consider the downside Beta only may be biased. This study addresses this issue by including downside co-skewness Risk in addition to the downside Beta Risk in the pricing model. In a sample of 27 emerging markets two-stage rolling regression analysis fails to support pricing models with downside Risk measures. In a cross-sectional analysis inclusion of downside co-skewness improves model fit. When considered together, downside Beta is potential and downside co-skewness is a Risk to the rational investor. Even though our results are inconclusive the evidence strongly suggests a need for further investigation of co-skewness Risk in pricing models that adopt a downside Risk framework.

  • Beta Risk and Regime Shift in Market Volatility
    SSRN Electronic Journal, 2004
    Co-Authors: Roland G. Shami, Don Upatissa Asoka Galagedera
    Abstract:

    In this paper, we relate security returns in the thirty securities in the Dow Jones index to regime shifts in the market portfolio (S&P500) volatility. We model market volatility as a multiple-state Markov switching process of order one and estimate non-diversifiable security Risk (Beta) in the different market volatility regimes. We test the significance of the premium of the Beta Risk associated with the different market regimes and find evidence of a relationship between security return and Beta Risk when conditional on the up and down market movement.

  • Beta Risk and Regime Shift in Market Volatility
    The Finance, 2004
    Co-Authors: Roland G. Shami, Don Upatissa Asoka Galagedera
    Abstract:

    In this paper, we relate the returns in the thirty securities in the Dow Jones index to regime shifts in stock market volatility. We apply a Markov switching process of order one to market volatility and examine the variation in the securities' returns in different volatility regimes. We test the significance of the Risk premium in different market regimes and we find evidence of relationship between market volatility and securities Beta Risk.

Robert W. Faff - One of the best experts on this subject based on the ideXlab platform.

  • Alternative Beta Risk estimators in cases of extreme thin trading: Canadian evidence
    Applied Financial Economics, 2005
    Co-Authors: Robert Darren Brooks, Robert W. Faff, Tim R. L. Fry, Emawtee Bissoondoyal-bheenick
    Abstract:

    In this paper, an alternative method of estimating the systematic Risk for Canadian stocks is presented and empirically investigated. The method proposed is applied to a set of data impacted by censoring - the presence of zero returns, which occurs in extreme cases of thin trading. The approach used is the sample selectivity model, which is a two-step procedure: with a selectivity component and a regression component. In addition, this study compares the new Beta estimate to the standard OLS Beta and the Dimson Beta. The results indicate that the selectivity-corrected Beta does correct the downward bias of the OLS estimates and possesses desirable statistical properties.

  • Global industry Betas
    Applied Economics Letters, 2003
    Co-Authors: Frida Lie, Robert W. Faff
    Abstract:

    The stability of global industry Betas is analysed over the twenty-year period 1975 to 1994. In addition, the impact of the October 1987 international stock market crash on these Betas is investigated. Generally, a considerable variation in Betas is found. In terms of the effect of the 1987 stock market crash on Beta Risk, it is found that the magnitude of the effect of the crash varied markedly across industries.

  • New evidence on the impact of financial leverage on Beta Risk: A time-series approach
    The North American Journal of Economics and Finance, 2002
    Co-Authors: Robert W. Faff, Robert Darren Brooks, Ho Yew Kee
    Abstract:

    Abstract The traditional estimation of a project’s cost of capital often requires leverage adjustments to Beta. Several researchers have empirically investigated the relationship between the debt/equity ratio ( D / E ) and Beta implied by such leverage adjustments. Typically, this has involved cross-sectional analysis of a sample of U.S. firms in selected industry classifications. The major contribution of the current study is to extend this evidence by investigating the relationship between financial leverage and Beta using a time-series approach. This has several advantages over the cross-sectional approach. Our results reveal that while the estimated unlevered Beta produced by the time-series approach is quite close to the theoretically implied unlevered Beta, the mean difference between the two measures across our sample of 348 U.S. stocks is highly significant. The analysis also reveals that 30–40% of our full sample rejects a theoretical D / E restriction on the time-series model. Moreover, the results suggest that the restriction is much more likely to be rejected for stocks with high debt/equity ratios, which in general have low unlevered Betas. Further, there is a considerable cross-sectional variation in the proportion of these rejections across industry groupings. Accordingly, these results suggest that due care needs to be applied when taking the traditional view of delevering Beta Risk.

  • Australian industry Beta Risk, the choice of market index and business cycles
    Applied Financial Economics, 2000
    Co-Authors: Vanitha Ragunathan, Robert W. Faff, Robert Darren Brooks
    Abstract:

    The paper presents an investigation of the equity Beta Risk of 23 Australian industry portfolios over the period 1974 to 1992. A comparison of domestic and international market model Betas, favours the domestic Risk measures, although the international counterparts are generally statistically significant relative to a world market index. Furthermore, the international Betas seem to display greater instability than the domestic Beta estimates. Tests are made to determine whether business cycles, both domestic and international, impact upon stock returns, via changes in the estimated domestic Beta. Generally, it is found that business cycles are important and that the US business cycle has a much larger impact on the equity Betas of industry portfolios, than does the Australian business cycle. Finally, it is found that interactions between the business cycles of Australia and the United States, have an impact on the Beta Risk for many industries.

  • Modelling the Equity Beta Risk of Australian Financial Sector Companies
    Australian Economic Papers, 2000
    Co-Authors: Frida Lie, Robert Darren Brooks, Robert W. Faff
    Abstract:

    In this paper we apply the generalised auto-regressive conditional heteroskedasticity (GARCH) and Kalman Filter approaches to modelling the equity Beta Risk of a sample of fifteen Australian financial sector companies. A de-regulated environment in which strong competitive forces are at play typifies the period of investigation. Consistent with the existing literature, we find that these modelling techniques perform well and, in particular, that the Kalman Filter approach is preferred. Further, we find that considerable variability of Risk occurs throughout the sample period. Thus, extending the evidence of Harper and Scheit (1992); Brooks and Faff (1995) and Brooks, Faff and McKenzie (1997), we find evidence consistent with the hypothesis that deregulation has impacted the Risk of banking sector stocks. Copyright 2000 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Shawkat Hammoudeh - One of the best experts on this subject based on the ideXlab platform.

  • systematic Risk and oil price and exchange rate sensitivities in asia pacific stock markets
    Research in International Business and Finance, 2007
    Co-Authors: Mohan Nandha, Shawkat Hammoudeh
    Abstract:

    Abstract This paper examines the relationship between Beta Risk and realized stock index return in the presence of oil and exchange rate sensitivities for 15 countries in the Asia-Pacific region using the international factor model. Thirteen of the 15 countries have the expected Beta signs and show significant sensitivity to domestic Risk when the world stock market is in both up and down modes. In terms of oil sensitivity, only the Philippines and South Korea are oil-sensitive to changes in the oil price in the short run, when the price is expressed in local currency only. Basically no country shows sensitivity to oil price measured in US dollar regardless whether the oil market is up or down. Nine countries are affected by changes in the exchange rate. In terms of relative factor sensitivity distribution, one is willing to conclude that these stock markets are more conditionally sensitive to local currency oil price changes than to Beta Risk wherever the relationships are significant.

Songsak Sriboonchitta - One of the best experts on this subject based on the ideXlab platform.

  • IUKM - Hedging Benefit of Safe-Haven Gold in Terms of Co-skewness and Covariance in Stock Market
    Lecture Notes in Computer Science, 2019
    Co-Authors: Sukrit Thongkairat, Woraphon Yamaka, Songsak Sriboonchitta
    Abstract:

    This study revisits the question of whether or not gold offers a hedging benefit for stock returns. Thus, we examine this benefit in terms of conditional co-skewness in which relate to the selected stock markets, conditional Beta Risk, and correlation. We use two-step approach to assess the impact of these factors, including Shanghai, GDAXI, FTSE100, S&P500, and Nikkei225 stock index returns. We firstly estimate the Markov-Switching Dynamic Conditional Correlation GARCH (MS-DCC-GARCH) to obtain the correlation, volatility, and covariance which we further use in co-skewness and Beta Risk computation. In the second step, the linear regression is employed to investigate the effect of the co-skewness and Beta Risk on stock returns and examine hedging benefit of gold on stocks. We find some evidences that gold can be acted as a safe haven asset for some major stock markets.

  • ECONVN - Time-Varying Beta Estimation in CAPM Under the Regime-Switching Model
    Econometrics for Financial Applications, 2017
    Co-Authors: Roengchai Tansuchat, Sukrit Thongkairat, Woraphon Yamaka, Songsak Sriboonchitta
    Abstract:

    The objectives of this study are to analyze the Risk of investment and to examine the structural change in the CAPM. To there ends, the Markov Switching dynamic regression is employed to construct the time varying Beta Risk when the market exhibits structural change. The model is applied to the Thai stock return data. The empirical results show a strong evidence of structural change in CAPM for four out of five Thai stocks of large market capitalization. We observe that the movement of Thai stocks fluctuated widely during the market turbulence, especially at the time of Thai financial crisis.