Volume 24, Numbers 1 & 2 / March/June , Pages 1-117
Conditional Beta: Evidence from Emerging Stock Markets
Multinational Finance Journal, 2020, vol. 24, no. 1/2, pp. 93-117
Osamah Alkhazali , American University of Sharjah, UAE    Corresponding Author

Using the Pettengill et al. (1995) asset pricing model, this paper examines the relationship between conditional beta and returns in 12 emerging stock markets over the period of 2005 to 2017. In applying weekly and monthly data, the evidence shows that there is a flat relationship between beta and returns using the unconditional CAPM. However, the opposite is true when applying the Pettengill et al. (1995) model. The findings indicate that the relationship between beta and returns is positive in a bullish market and negative in a bearish market. In addition, the results support the conditional CAPM for all months of the year. Finally, the results show that market excess returns are positive and the risk-return relationship is symmetrical in both bullish and bearish markets. We conclude that beta is still a valuable risk measure, which helps portfolio managers in emerging markets make optimal investment decisions.

Keywords : CAPM; Beta; MENA stock markets; emerging markets
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