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W. A. Franke College of Business, Northern Arizona University-20 McConnell Dr., Flagstaff, AZ 86011-5066, USA





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Abstract The Capital Asset Pricing Model CAPM has been a key theory in financial economics since the 1960s. One of its main contributions is to attempt to identify how the risk of a particular stock is related to the risk of the overall stock market using the risk measure Beta. If the relationship between an individual stock’s returns and the returns of the market exhibit heteroskedasticity, then the estimates of Beta for different quantiles of the relationship can be quite different. The behavioral ideas first proposed by Kahneman and Tversky 1979, which they called prospect theory, postulate that: i people exhibit -loss-aversion- in a gain frame; and ii people exhibit -risk-seeking- in a loss frame. If this is true, people could prefer lower Beta stocks after they have experienced a gain and higher Beta stocks after they have experienced a loss. Stocks that exhibit converging heteroskedasticity 22.2% of our sample should be preferred by investors, and stocks that exhibit diverging heteroskedasticity 12.6% of our sample should not be preferred. Investors may be able to benefit by choosing portfolios that are more closely aligned with their preferences. View Full-Text

Keywords: Beta; risk preferences; portfolio management; quantile regression; hetero-skedasticity Beta; risk preferences; portfolio management; quantile regression; hetero-skedasticity





Autor: Allen B. Atkins and Pin T. Ng *

Fuente: http://mdpi.com/



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