Cross-sectional regression analysis of return and beta in Japan

Hodoshima, Jiro; Garza–Gómez, Xavier; Kunimura, Michio

doi:10.1016/s0148-6195(00)00031-x

Cited by 53 publications

(45 citation statements)

References 9 publications

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“…Several authors have tried to demonstrate that the death of beta has been exaggerated [4,5] because there still exists a positive relationship between beta and return; other authors support the result found by Fama and French [1], proving that there is no correlation between beta and returns [11]; and ÿnally, other authors have stated that the relationship between both measures depends on the situation of the market expected return, above or below the risk-free return [3,6]. It is amazing how this evolution in ÿnancial economics theory is almost identical to the evolution of Bowman's paradox, although it is surprising that there is no mention in these ÿ-nancial works to the previous Bowman's paradox literature.…”

Section: Conclusion and Future Researchmentioning

confidence: 98%

“…Until the work by Fama and French [1], most research had obtained a signiÿcant positive relationship, as the CAPM theory postulates. From Fama and French [1] onwards, a new research stream in ÿnancial economics, known as "the death of beta" has arisen [4,5], which includes tests that have reported positive, negative or no correlation at all between return and beta (e.g., [3,6,7]). This new research stream is therefore challenging some of the more established assumptions in ÿnancial economics.…”

Section: Introductionmentioning

confidence: 99%

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A review of research on the negative accounting relationship between risk and return: Bowman's paradox

Nickel

Rodríguez

2002

Omega

105

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A cornerstone in ÿnance theory continues to be the positive relationship between risk and return in spite of Fama and French (The Journal of Finance 47(2) (1992) 427-65) and several later papers ÿnding no relationship between the two variables. Twelve years earlier, Bowman (Sloan Management Review 1980, pp. 17-31) studied the same relationship from organization theory, achieving similar results with accounting data, and developing a whole research stream known as "Bowman's paradox". This stream has contributed to some curious and interesting ideas that could also be applied to other di erent streams: new risk measures, managerial goal selection, response to the decline in the organization, diversiÿcation strategy on risk and return, among others. Similar to the ÿnancial stream, a number of researchers have tried to study this issue from the strategic management perspective. Their inconclusive results have generated a considerable controversy, keeping this research stream alive. In this work, we describe and explore this phenomenon from "Bowman's paradox", theoretical explanations, criticisms and future orientations. ?

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Section: Conclusion and Future Researchmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

A review of research on the negative accounting relationship between risk and return: Bowman's paradox

Nickel

Rodríguez

2002

Omega

105

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“…1 Many studies apply the PSM methodology to other markets. These include: Fletcher (1997Fletcher ( , 2000 and Hung et al (2004) for the UK market; Isakov (1999) for the Swiss market; Lam (2001) and Ho et al (2006) for the Hong Kong market; Elsas et al (2003) for the German market; Hodoshima et al (2000) for the Japanese market; Faff (2001) for the Australian market; and Sandoval and Saens (2004) for four Latin American markets. The overwhelming preponderance of these studies supports the PSM conclusion.…”

Section: Introductionmentioning

confidence: 99%

Conditional risk–return relationship in a time-varying beta model

Huang

Hueng

2008

Quantitative Finance

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We investigate the asymmetric risk-return relationship in a time-varying beta CAPM. A state space model is established and estimated by the Adaptive Least Squares with Kalman foundations proposed by McCulloch (2006). Using S&P 500 daily data from 1987:11-2003:12, we find a positive risk-return relationship in the up market (positive market excess returns) and a negative relationship in the down market (negative market excess returns). This supports the argument by Pettengill, Sundaram and Mathur (1995), who use a constant beta model. However, our model outperforms theirs by eliminating the unexplained returns and improving the accuracy of the estimated risk price.

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“…The positive average returns arise from momentum strategies although expected profits on stocks are stable overtime. Hodoshima, Garza-Gómez, and Kunimura (2000), document the association between risk and stocks return in Japanese equities market via using Cross Section regressions. It is evidenced that there is an insignificant relationship among return and risks as regressions apply on extra return.…”

Section: Literature Reviewmentioning

confidence: 99%

Market Volatility and Momentum: Evidence from Pakistani Stock Exchange

Khan

Waqas

Hassan

2017

SIJMB

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______________________________________________________________ AbstractThis study explores the relationship between market volatility and momentum profitability. This study indicates that market state volatility has significant power to forecast momentum payoffs, especially in negative market states. The results are the context in the presence of market state and business cycle variables. Market premium is significant and negative. Market volatility is also found negatively influencing momentum profits. Volatility is divided into volatility in the positive market and volatility in the negative market. Both are significantly and negatively influencing momentum profits. Vol+ and Vol-both have negative signs; Vol-is dominant in terms of the magnitudes of the coefficient and the t-statistics. Business cycle effect measured by term and yield is not found significant. Non-linearity has not been observed regarding the term. Results are found robust for market adjusted momentum payoff. The study also explores the impact of market state, volatility and business cycles on the return of loser and winner portfolio. This study reports that returns of the loser portfolios are explained by market component, whereas volatility is found to be insignificant. The macroeconomic variables TERM, TERM2 and YLD show signs of statistical significance. Market factor is significantly and positively influencing winner portfolios. The results indicate that volatile markets forecast low returns on winner stocks. Return dispersion used to measures cross-sectional is also found significant. The study recommends that investors should devise investment and momentum strategies on the basis of the volatility of stocks and the business cycle. The tests of this study show that volatile down markets forecast low momentum payoffs. The timeseries predictability of momentum is asymmetric, which arises from loser stocks.

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Cross-sectional regression analysis of return and beta in Japan

Cited by 53 publications

References 9 publications

A review of research on the negative accounting relationship between risk and return: Bowman's paradox

A review of research on the negative accounting relationship between risk and return: Bowman's paradox

Conditional risk–return relationship in a time-varying beta model

Market Volatility and Momentum: Evidence from Pakistani Stock Exchange

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