DUAL BETAS ON THE
Date
2011-05-10
Authors
Lakhan, Ashwin
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Abstract
Since the study by Fama & French (1992) there has been an academic debate about
the usefulness of the Capital Asset Pricing Model (CAPM). Some researchers
believe that the CAPM should be abandoned for a new model, like the dual beta
model, which provides a better explanation of share returns than the traditional
CAPM.
The purpose of this research is to identify whether beta and the market-effects (i.e.
the size, value and momentum effects) can explain share returns under different
stock market conditions. If this proves to be the case, the findings could be used as
a foundation towards the creation of a trading strategy for investors effectively to
exploit these market-effects.
This research shows that there is a significant non-symmetrical relationship between
dual beta and realised returns. However, in the presence of the size and value
terms, the dual beta relationship with realised returns becomes insignificant. It was
also found that the size, value and momentum effects were present only in certain
bull and bear market conditions
Description
MBA - WBS
Keywords
Capital Asset Pricing Model, Dual Beta Model, Johannesburg Securities Exchange