Testing the consistency of beta during the COVID 19 pandemic
0
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
Stock markets are extremely sensitive to news and unexpected events, which leads stock prices to quickly react to all information concerning future events (Niederhoffer, 1971). According to Merril (1984), the market has some very bad moments immediately following the tragic news because selling drives prices down to a surprising degree. However, when a day passes, the market recovers from its panic and sometimes works upward to a higher level. This research will test the consistency of beta during the COVID 19 pandemic using the CAPM and Fama-French models. We investigate whether or not the beta is consistent during the pandemic of COVID 19. We find the CAPM model poorly explains the excess returns whereas the Fama-French three factor model is better at explaining excess returns thanks to the size and the value factors. As a possible explanation, we suspect the possibility of the KOPSI200 being a misleading index during critical periods such as the COVID 19 pandemic. We discover results proving otherwise.
Abstract
Stock markets are extremely sensitive to news and unexpected events, which leads stock prices to quickly react to all information concerning future events (Niederhoffer, 1971). According to Merril (1984), the market has some very bad moments immediately following the tragic news because selling drives prices down to a surprising degree. However, when a day passes, the market recovers from its panic and sometimes works upward to a higher level. This research will test the consistency of beta during the COVID 19 pandemic using the CAPM and Fama-French models. We investigate whether or not the beta is consistent during the pandemic of COVID 19. We find the CAPM model poorly explains the excess returns whereas the Fama-French three factor model is better at explaining excess returns thanks to the size and the value factors. As a possible explanation, we suspect the possibility of the KOPSI200 being a misleading index during critical periods such as the COVID 19 pandemic. We discover results proving otherwise.
참고문헌 (43)
- Akhtaruzzaman Md, "Financial contagion during COVID–19 crisis", Finance Research Letters, 38, pp.101604~ (2021)
- Albulescu, Claudiu Tiberiu, "COVID 19 and the United States financial markets’ volatility", Finance research letters, 38, pp.101699~ (2021)
- Ang Andrew, "Downside risk", The review of financial studies, 19, pp.1191~1239 (2006)
- Ashraf, Badar Nadeem, "Stock markets’ reaction to COVID 19 : Cases or fatalities?", Research in International Business and Finance, 54, pp.101249~ (2020)
- Baker Malcolm, "Investor sentiment and the crosssection of stock returns", Journal of Finance, 61, pp.1645~1680 (2006)
- Bhattacharya Sonali, "Covid 19 : Social, financial and economic implications, Australasian Accounting", Business and Finance Journal, 15, pp.1~4 (2021)
- Bortoluzzo Adriana Bruscato, "The influence of the 2008 financial crisis on the predictiveness of risky asset pricing models in Brazil", Revista Contabilidade Finanças, 27, pp.408~420 (2016)
- Bos Theodore, "An empirical investigation of the possibility of stochastic systematic risk in the market model", Journal of Business, pp.35~41 (1984)
- Caporale, Tony, "Time-varying CAPM betas and banking sector risk", Economics Letters, 115, pp.293~295 (2012)
- Choudhary Kapil, "Testing capital asset pricing model : Empirical evidence from the Indian equity market", Eurasian Journal of Business and Economics, 3, pp.127~138 (2010)
- Fabozzi, Frank J., "Beta as a random coefficient", Journal of Financial and Quantitative Analysis, 13, pp.101~116 (1978)
- Fama, Eugene F., "The cross-section of expected stock returns", Journal of Finance, 47, pp.427~465 (1992)
- Fama, Eugene F., "Common risk factors in the returns on stocks and bonds", Journal of Financial Economics, 33, pp.3~56 (1993)
- Fama, Eugene F., "Size and book-to-market factors in earnings and returns", Journal of finance, 50, pp.131~155 (1995)
- Fama, Eugene F., "The CAPM is wanted, dead or alive", Journal of Finance, 51, pp.1947~1958 (1996)
- Fama, Eugene F., "Disagreement, tastes, and asset prices", Journal of Financial Economics, 83, pp.667~689 (2007)
- Fama, Eugene F., "Dissecting anomalies with a fivefactor model", Review of Financial Studies, 29, pp.69~103 (2016)
- Ferson, Wayne E., "Do arbitrage pricing models explain the predictability of stock returns?", Journal of Business, pp.309~349 (1995)
- Ghysels, Eric, "On stable factor structures in the pricing of risk : do time-varying betas help or hurt?", Journal of Finance, 53, pp.549~573 (1998)
- Gibbons, Michael R., "A test of the efficiency of a given portfolio", Econometrica, 57, pp.1121~1152 (1989)
- Groenewold Nicolaas, "Time-varying estimates of CAPM betas", Mathematics and Computers in Simulation, 48, pp.531~539 (1999)
- Hollstein, Fabian, "Estimating beta : The international evidence", Journal of Banking and Finance, 121, pp.105968~ (2020)
- Horváth Dominik, "The examination of Fama-French model during the COVID 19", Finance Research Letters, 41, pp.101848~ (2021)
- Hou Kewei, "Digesting anomalies : An investment approach", Review of Financial Studies, 28, pp.650~705 (2015)
- World economic outlook update June 2020, "IMF", ~ (2020)
- Jegadeesh Narasimhan, "Returns to buying winners and selling losers : Implications for stock market efficiency", Journal of Finance, 48, pp.65~91 (1993)
- Jensen, Michael C, "The performance of mutual funds in the period 1945-1964", Journal of Finance, 23, pp.389~416 (1968)
- Kamstra, Mark J., "Winter blues : A SAD stock market cycle", American Economic Review, 93, pp.324~343 (2003)
- Lee, S., "Performance of socially responsible firms during the COVID 19 crisis and trading behavior by investor type : Evidence from the Korean stock market", Finance Research Letters, 45, pp.102660~ (2022)
- Lettau Martin, "Consumption, aggregate wealth, and expected stock returns", Journal of Finance, 56, pp.815~849 (2001)
- Lintner, John, "Stochastic optimization models in finance", pp.131~155 (1975), Academic Press
- Ludvigson, Sydney C., "Macro factors in bond risk premia", Review of Financial Studies, 22, pp.5027~5067 (2009)
- Markowitz, Harry M., "Foundations of portfolio theory", Journal of finance, 46, pp.469~477 (1991)
- Merrill, Arthur A, "Behavior of prices on Wall Street" (1966), Analysis Press
- Mossin, Jan, "Equilibrium in a capital asset market", Econometrica, 34, pp.768~783 (1966)
- Niederhoffer, Victor, "The analysis of world events and stock prices", Journal of Business, 44, pp.193~219 (1971)
- Racicot François-Éric, "The conditional Fama-French model and endogenous illiquidity : A robust instrumental variables test", PloS one, 14, pp.e0221599~ (2019)
- Setiawan Budi, "COVID 19 pandemic, asset prices, risks, and their convergence: A survey of Islamic and G7 stock market, and alternative assets", Borsa Istanbul Review (2022)
- Sharpe, William F., "Capital asset prices : A theory of market equilibrium under conditions of risk", Journal of Finance, 19, pp.425~442 (1964)
- Song Hyoung Ju, "Impact of the COVID 19 pandemic : Evidence from the US restaurant industry", International Journal of Hospitality Management, 92, pp.102702~ (2021)
- Syed, Sarfaraz Ali Shah,, "Stock market in the age of COVID 19 : Mere acclimatization or Stockholm syndrome?", Journal of Economic Asymmetries, 25, pp.e00245~ (2022)
- Coronavirus disease (COVID-2019) situation reports, "WHO", ~, pp.Situation report–152 (2020)
- Zhang Dayong, "Financial markets under the global pandemic of COVID 19", Finance Research Letters, 36, pp.101528~ (2020)