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The Conditional Beta and the Cross‐Section of Expected Returns

The Conditional Beta and the Cross‐Section of Expected Returns We examine the cross‐sectional relation between conditional betas and expected stock returns for a sample period of July 1963 to December 2004. Our portfolio‐level analyses and the firm‐level cross‐sectional regressions indicate a positive, significant relation between conditional betas and the cross‐section of expected returns. The average return difference between high‐ and low‐beta portfolios ranges between 0.89% and 1.01% per month, depending on the time‐varying specification of conditional beta. After controlling for size, book‐to‐market, liquidity, and momentum, the positive relation between market beta and expected returns remains economically and statistically significant. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Financial Management Wiley

The Conditional Beta and the Cross‐Section of Expected Returns

Financial Management , Volume 38 (1) – Mar 1, 2009

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References (64)

Publisher
Wiley
Copyright
© 2009 Financial Management Association International.
ISSN
0046-3892
eISSN
1755-053X
DOI
10.1111/j.1755-053X.2009.01030.x
Publisher site
See Article on Publisher Site

Abstract

We examine the cross‐sectional relation between conditional betas and expected stock returns for a sample period of July 1963 to December 2004. Our portfolio‐level analyses and the firm‐level cross‐sectional regressions indicate a positive, significant relation between conditional betas and the cross‐section of expected returns. The average return difference between high‐ and low‐beta portfolios ranges between 0.89% and 1.01% per month, depending on the time‐varying specification of conditional beta. After controlling for size, book‐to‐market, liquidity, and momentum, the positive relation between market beta and expected returns remains economically and statistically significant.

Journal

Financial ManagementWiley

Published: Mar 1, 2009

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