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2009•Economie teoretică şi aplicatăOpen access

D-CAPM: EMPIRICAL RESULTS ON THE BUCHAREST STOCK EXCHANGE

Alexandru Todea, Horia Ioan Tulai, Anita Pleşoianu

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Abstract

The downside capital asset pricing model measures the downside beta of risk and is proposed by Estrada (2002) as an alternative to the capital asset pricing model to measure the risk of emerging market investments. The basis for this argument is that investors are not particularly worrisome of upside risk, while downside risk is always a problem. This article attempts to test the validity of D-CAPM in the case of Bucharest Stock Exchange. Research findings indicate no meaningful relationship between downside beta coefficients and ex-post risk premiums of the selected stocks, except the period of crisis.

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What this paper is about

The downside capital asset pricing model measures the downside beta of risk and is proposed by Estrada (2002) as an alternative to the capital asset pricing model to measure the risk of emerging market investments. The basis for this argument is that investors are not particularly worrisome of upside risk, while downside risk is always a problem. This article attempts to test the validity of D-CAPM in the case of Bucharest Stock Exchange. Research findings indicate no meaningful relationship between downside beta coefficients and ex-post risk premiums of the selected stocks, except the period of crisis.

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Available abstract

The downside capital asset pricing model measures the downside beta of risk and is proposed by Estrada (2002) as an alternative to the capital asset pricing model to measure the risk of emerging market investments. The basis for this argument is that investors are not particularly worrisome of upside risk, while downside risk is always a problem. This article attempts to test the validity of D-CAPM in the case of Bucharest Stock Exchange. Research findings indicate no meaningful relationship between downside beta coefficients and ex-post risk premiums of the selected stocks, except the period of crisis.

Key concepts: Capital asset pricing model, Downside risk, Stock exchange, Financial economics, Economics, Systematic risk, BETA (programming language), Stock market

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