Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case
This study makes a comparative analysis of the explanatory power of CAPM and downside CAPM based risk measures for stock returns in Borsa Istanbul. 22 risk measures based on mean-variance and mean-semivariance approaches using global and local single factor models are examined for 2005–2016 period i...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2018-12-01
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| Series: | Borsa Istanbul Review |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2214845018300309 |
| _version_ | 1811199304551890944 |
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| author | Mehmet Emin Yildiz Yaman O. Erzurumlu |
| author_facet | Mehmet Emin Yildiz Yaman O. Erzurumlu |
| author_sort | Mehmet Emin Yildiz |
| collection | DOAJ |
| description | This study makes a comparative analysis of the explanatory power of CAPM and downside CAPM based risk measures for stock returns in Borsa Istanbul. 22 risk measures based on mean-variance and mean-semivariance approaches using global and local single factor models are examined for 2005–2016 period in a panel data setting. Mean-semivariance approach (downside CAPM) based downside betas and downside standard deviations have significant explanatory power for stock returns whereas CAPM based local and global betas fail to explain stock returns. The mean-semivariance approach (downside CAPM) could determine cost of equity more accurately. Deviations of returns below the mean are better risk indicators than deviations of returns below risk free rate of return and negative returns. Borsa Istanbul is partially integrated with the global market index and the degree of integration is higher during periods of negative returns. Results suggest that USD/TRY relationship is the dominating factor compared to MSCI movements. Keywords: Asset pricing, Downside beta, Downside CAPM, Downside risk, Semivariance, Borsa Istanbul, Jel Classification: C21, C23, G11, G12 |
| first_indexed | 2024-04-12T01:45:43Z |
| format | Article |
| id | doaj.art-16c16bba08bc484abdc050236d4fb53d |
| institution | Directory Open Access Journal |
| issn | 2214-8450 |
| language | English |
| last_indexed | 2024-04-12T01:45:43Z |
| publishDate | 2018-12-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Borsa Istanbul Review |
| spelling | doaj.art-16c16bba08bc484abdc050236d4fb53d2022-12-22T03:53:05ZengElsevierBorsa Istanbul Review2214-84502018-12-01184259268Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul caseMehmet Emin Yildiz0Yaman O. Erzurumlu1Department of International Trade and Business, Faculty of Economics and Administrative Sciences Dogus University, 34722, Istanbul, TurkeyEngineering Management Department, Faculty of Engineering and Natural Sciences, Bahcesehir University, 34353, Istanbul, Turkey; Corresponding author.This study makes a comparative analysis of the explanatory power of CAPM and downside CAPM based risk measures for stock returns in Borsa Istanbul. 22 risk measures based on mean-variance and mean-semivariance approaches using global and local single factor models are examined for 2005–2016 period in a panel data setting. Mean-semivariance approach (downside CAPM) based downside betas and downside standard deviations have significant explanatory power for stock returns whereas CAPM based local and global betas fail to explain stock returns. The mean-semivariance approach (downside CAPM) could determine cost of equity more accurately. Deviations of returns below the mean are better risk indicators than deviations of returns below risk free rate of return and negative returns. Borsa Istanbul is partially integrated with the global market index and the degree of integration is higher during periods of negative returns. Results suggest that USD/TRY relationship is the dominating factor compared to MSCI movements. Keywords: Asset pricing, Downside beta, Downside CAPM, Downside risk, Semivariance, Borsa Istanbul, Jel Classification: C21, C23, G11, G12http://www.sciencedirect.com/science/article/pii/S2214845018300309 |
| spellingShingle | Mehmet Emin Yildiz Yaman O. Erzurumlu Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case Borsa Istanbul Review |
| title | Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case |
| title_full | Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case |
| title_fullStr | Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case |
| title_full_unstemmed | Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case |
| title_short | Testing postmodern portfolio theory based on global and local single factor market model: Borsa Istanbul case |
| title_sort | testing postmodern portfolio theory based on global and local single factor market model borsa istanbul case |
| url | http://www.sciencedirect.com/science/article/pii/S2214845018300309 |
| work_keys_str_mv | AT mehmeteminyildiz testingpostmodernportfoliotheorybasedonglobalandlocalsinglefactormarketmodelborsaistanbulcase AT yamanoerzurumlu testingpostmodernportfoliotheorybasedonglobalandlocalsinglefactormarketmodelborsaistanbulcase |