The risk-return relations in the Singapore stock market

Gordon Y N TANG*, Wai Cheong Shum

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

Abstract

This paper examines the risk-return relations in the Singapore stock market for the period April 1986 to December 1998. Though beta is significantly related to realized returns, the explanatory power is low. Adding other stock characteristics such as skewness and kurtosis provides limited incremental benefits. However, when a conditional framework based on up and down markets is introduced, the explanatory power increases more than 100 times and there is a significant positive (negative) relation between beta and returns when the market excess returns are positive (negative). The same relation applies when unsystematic risk, total risk and kurtosis are added separately to the beta-return relation during up and down markets with increased explanatory power. Our results indicate that other stock characteristics in addition to beta are also important in pricing risky assets and investors do not hold diversified portfolios. Our results are also checked and compared with another conditional model with time-varying betas conditional on a set of economic variables.

Original languageEnglish
Pages (from-to)179-195
Number of pages17
JournalPacific Basin Finance Journal
Volume12
Issue number2
DOIs
Publication statusPublished - Apr 2004

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Beta
  • CAPM
  • Economic variables
  • Kurtosis
  • Singapore stock returns
  • Up and down markets

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