| A Reexamination of Bad Beta and Good Beta |
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Ming Wu, Ki Yool Ohk, Kwangsoo Ko |
| 나쁜 베타와 좋은 베타에 대한 재조명 |
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오명, 옥기율, 고광수 |
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| Abstract |
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Using the log-linear model developed by Campbell and Vuolteenaho (2004), this paper decomposes unexpected stock returns into cash-flow news and discount-rate news in the Korean stock market. The major empirical findings are as follows: First, we select six state variables for vector auto-regressive (VAR) model and decompose stock returns into two pieces of news successfully. Second, we find that discount-rate beta is higher than cash-flow beta, namely that discount-rate news causes much more variation in stock returns than cash-flow news. Third, discount-rate news rather than cash-flow news is priced when we employ pooled regressions. We conclude that discount-rate beta is bad beta in the Korean stock market. Finally, this result is robust when we divide stock market into up and down ones. An important academic contribution of this paper is the successful decomposition of stock returns into cash-flow news and discount-rate news. Unlike the U.S. stock market, we find that discount-rate beta is bad beta in the Korean stock market. |
| Key Words:
나쁜 베타,로그-선형 모형,좋은 베타,할인율 뉴스,현금흐름 뉴스,Bad Beta,Cash-Flow News,Discount-Rate News,Good Beta,Log-Linear Model |
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