Beta and Returns Revisited - Evidence from the German Stock Market (1999)
| Venue: | Journal of International Financial Markets, Institutions and Money |
| Citations: | 14 - 1 self |
BibTeX
@ARTICLE{Elsas99betaand,
author = {Ralf Elsas and Mahmoud El-Shaer and Erik Theissen},
title = {Beta and Returns Revisited - Evidence from the German Stock Market},
journal = {Journal of International Financial Markets, Institutions and Money},
year = {1999},
volume = {13},
pages = {1--18}
}
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Abstract
Traditional tests of the CAPM following the Fama / MacBeth (1973) procedure are tests of the joint hypotheses that there is a relationship between beta and realized return and that the market risk premium is positive. The conditional test procedure developed by Pettengill / Sundaram / Mathur (1995) allows to independently test the hypothesis of a relation between beta and realized returns. Monte Carlo simulations show that the conditional test reliably identifies this relation. In an empirical examination for the German stock market we find a significant relation between beta and return. Previous studies failed to identify this relationship probably because the average market risk premium in the sample period was close to zero. Our results provide a justification for the use of betas estimated from historical return data by portfolio managers. JEL classification: G12 Keywords. Capital Asset Pricing Model, Market risk premium, Beta and return * We thank A. Craig MacKinlay, Jan P. Kr...
Keyphrases
german stock market market risk premium conditional test procedure g12 keywords average market risk premium previous study jel classification traditional test pettengill sundaram mathur significant relation sample period joint hypothesis conditional test reliably historical return data empirical examination portfolio manager craig mackinlay fama macbeth monte carlo simulation capital asset pricing model
