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Downside Risk - En studie av riskkompensation på den svenska aktiemarknaden

Gustafsson, Björn (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:
author
Gustafsson, Björn
supervisor
organization
year
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
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},
  keyword      = {risk,return,Risk Premium,downside beta,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {swe},
  note         = {Student Paper},
  title        = {Downside Risk - En studie av riskkompensation på den svenska aktiemarknaden},
  year         = {2006},
}