Systematic Risk in Emerging Markets: The D-CAPM
- Topics:
- Investment and Capital Markets
- Tags:
- Emerging Market,
- Financial Services,
- Management,
- Marketing,
- Marketing Research,
- Risk,
- Strategy,
- University Of Navarra
- Source:
- University of Navarra
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Overview: There is by now a growing literature arguing against the use of the CAPM to estimate required returns on equity in emerging markets. The model characterizes that it measures risk by beta, which follows from an equilibrium in which investors display mean-variance behavior. The semi variance of returns is a more plausible measure of risk and can be used to generate an alternative behavioral hypothesis (mean-semivariance behavior), an alternative measure of risk for diversified investors (the downside beta), and an alternative pricing model (the D-CAPM). The empirical evidence discussed below for the entire MSCI database of emerging markets clearly supports the downside beta and the D-CAPM over beta and the CAPM.
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Format: PDF | Size: 57KB | Date: Sep 2002 | Pages: 14
