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STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS

STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS SEPTEMBER 1977 STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS FRANKJ. FABOZW JACK AND CLARK FRANCIS* 1. INTRODUCTION THISPAPER EMPLOYS standard econometric significance tests to determine whether the regression statistics from a sample of 700 NYSE stocks differ significantly when measured over bull and bear market conditions.' The need for such tests arises from several different sources. Levy suggested calculating separate beta coefficients for bull and bear markets [lo]. Black has developed a two-factor market model which allows for the alpha to shift over time 11, 23. Some investment advisors and large national brokerages have followed the advice of Levy and Black and sell separate alpha and beta statistics for bull and bear markets for aggregate fees (mostly in soft commission dollars) of millions of dollars per year? The specific subject of this inquiry is the single-index market model (SIMM) shown in equation (1). rir= a, birmt+ e,, where r, denotes the capital gain plus cash dividend rate of return for the ith common stock in the tth month; rmf represents the pre-tax capital gain plus cash dividend one-month rate of return calculated from Standard and Poor's 500 Composite (SPSOO) for the tth month, http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS

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References (13)

Publisher
Wiley
Copyright
1977 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1977.tb03312.x
Publisher site
See Article on Publisher Site

Abstract

SEPTEMBER 1977 STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS FRANKJ. FABOZW JACK AND CLARK FRANCIS* 1. INTRODUCTION THISPAPER EMPLOYS standard econometric significance tests to determine whether the regression statistics from a sample of 700 NYSE stocks differ significantly when measured over bull and bear market conditions.' The need for such tests arises from several different sources. Levy suggested calculating separate beta coefficients for bull and bear markets [lo]. Black has developed a two-factor market model which allows for the alpha to shift over time 11, 23. Some investment advisors and large national brokerages have followed the advice of Levy and Black and sell separate alpha and beta statistics for bull and bear markets for aggregate fees (mostly in soft commission dollars) of millions of dollars per year? The specific subject of this inquiry is the single-index market model (SIMM) shown in equation (1). rir= a, birmt+ e,, where r, denotes the capital gain plus cash dividend rate of return for the ith common stock in the tth month; rmf represents the pre-tax capital gain plus cash dividend one-month rate of return calculated from Standard and Poor's 500 Composite (SPSOO) for the tth month,

Journal

The Journal of Finance – Wiley

Published: Sep 1, 1977

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