Downside Risk - En studie av riskkompensation på den svenska aktiemarknaden
(2006)Department of Economics
- Abstract
- This paper investigates the compensation for risk in the context of the Swedish stock market with a special focus on downside risk. Using daily market data collected from the A-list of the Stockholm Stock Exchange between the years 1983 and 2005 the purpose is to answer the question whether Swedish investors are compensated for holding stocks with high downside risk, measured as downside beta. Using panel data analysis it is shown, in accordance with most previous evidence in international research, firstly that stocks with high beta values on average experience higher returns than stocks with low beta values, and secondly that stocks with high downside beta values experience higher returns than stocks with high beta values in general. On... (More)
- This paper investigates the compensation for risk in the context of the Swedish stock market with a special focus on downside risk. Using daily market data collected from the A-list of the Stockholm Stock Exchange between the years 1983 and 2005 the purpose is to answer the question whether Swedish investors are compensated for holding stocks with high downside risk, measured as downside beta. Using panel data analysis it is shown, in accordance with most previous evidence in international research, firstly that stocks with high beta values on average experience higher returns than stocks with low beta values, and secondly that stocks with high downside beta values experience higher returns than stocks with high beta values in general. On the other hand, cross-sectional regression methodology using a bivariate regression approach shows that downside beta does not explain excess returns very well. Instead, regression analysis suggest that high upside beta does a much better job in explaining excess return over this time period compared to downside beta. The contradictory results may very well be explained by the high volatility in the market place during the time period studied, resulting in measurement errors and less reliable results. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1338298
- author
- Gustafsson, Björn
- supervisor
- organization
- year
- 2006
- type
- M2 - Bachelor Degree
- subject
- keywords
- risk, return, Risk Premium, downside beta, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- Swedish
- id
- 1338298
- date added to LUP
- 2006-02-07 00:00:00
- date last changed
- 2010-08-03 10:49:03
@misc{1338298,
abstract = {{This paper investigates the compensation for risk in the context of the Swedish stock market with a special focus on downside risk. Using daily market data collected from the A-list of the Stockholm Stock Exchange between the years 1983 and 2005 the purpose is to answer the question whether Swedish investors are compensated for holding stocks with high downside risk, measured as downside beta. Using panel data analysis it is shown, in accordance with most previous evidence in international research, firstly that stocks with high beta values on average experience higher returns than stocks with low beta values, and secondly that stocks with high downside beta values experience higher returns than stocks with high beta values in general. On the other hand, cross-sectional regression methodology using a bivariate regression approach shows that downside beta does not explain excess returns very well. Instead, regression analysis suggest that high upside beta does a much better job in explaining excess return over this time period compared to downside beta. The contradictory results may very well be explained by the high volatility in the market place during the time period studied, resulting in measurement errors and less reliable results.}},
author = {{Gustafsson, Björn}},
language = {{swe}},
note = {{Student Paper}},
title = {{Downside Risk - En studie av riskkompensation på den svenska aktiemarknaden}},
year = {{2006}},
}