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LUND UNIVERSITY LIBRARIES

Asymmetric Risk and Asset Pricing

Svorén, Emmi LU and Granqvist, Christopher (2025) NEKN02 20251
Department of Economics
Abstract (Swedish)
This study investigates whether downside risk, captured through downside beta, is a priced risk factor in the Swedish stock market. Using monthly data from 1990 to 2019, the study sorts portfolios of Swedish stocks into quintiles by downside beta. These portfolios are then evaluated using standard asset pricing models, along with extensions that incorporate low-beta strategies such as the inclusion of the betting against beta factor. In addition, a “betting against downside beta” (BADB) factor is constructed to test for a potential downside risk premium. The findings show limited support for downside beta as a distinct source of priced risk. While some patterns emerge, particularly among smaller stocks, most results are absorbed by the... (More)
This study investigates whether downside risk, captured through downside beta, is a priced risk factor in the Swedish stock market. Using monthly data from 1990 to 2019, the study sorts portfolios of Swedish stocks into quintiles by downside beta. These portfolios are then evaluated using standard asset pricing models, along with extensions that incorporate low-beta strategies such as the inclusion of the betting against beta factor. In addition, a “betting against downside beta” (BADB) factor is constructed to test for a potential downside risk premium. The findings show limited support for downside beta as a distinct source of priced risk. While some patterns emerge, particularly among smaller stocks, most results are absorbed by the traditional betting against beta factor. The study concludes that downside risk is not independently priced in the Swedish market once the broader beta anomaly is accounted for. (Less)
Please use this url to cite or link to this publication:
author
Svorén, Emmi LU and Granqvist, Christopher
supervisor
organization
course
NEKN02 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Risk, Assymetric Risk, Asset Pricing, Downside Beta
language
English
id
9208175
date added to LUP
2025-09-12 10:44:08
date last changed
2025-09-12 10:44:08
@misc{9208175,
  abstract     = {{This study investigates whether downside risk, captured through downside beta, is a priced risk factor in the Swedish stock market. Using monthly data from 1990 to 2019, the study sorts portfolios of Swedish stocks into quintiles by downside beta. These portfolios are then evaluated using standard asset pricing models, along with extensions that incorporate low-beta strategies such as the inclusion of the betting against beta factor. In addition, a “betting against downside beta” (BADB) factor is constructed to test for a potential downside risk premium. The findings show limited support for downside beta as a distinct source of priced risk. While some patterns emerge, particularly among smaller stocks, most results are absorbed by the traditional betting against beta factor. The study concludes that downside risk is not independently priced in the Swedish market once the broader beta anomaly is accounted for.}},
  author       = {{Svorén, Emmi and Granqvist, Christopher}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Asymmetric Risk and Asset Pricing}},
  year         = {{2025}},
}