Systematic Risk on Istanbul Stock Exchange: Traditional Beta Coefficient Versus Downside Beta Coefficient

Abstract

The aim of this study is to test the validity of Downside Capital Asset Pricing Model (D-CAPM) on the ISE. At the same time, the explanatory power of CAPM's traditional beta and D-CAPM's downside beta on the changes in the average return values are examined comparatively. In this context, the monthly data for seventy three stocks that are continuously traded on the ISE for the period 1991-2009 is used. Regression analysis is applied in this study. The research results have shown that DCAPM is valid on the ISE. In addition, it is obtained that the power of downside beta coefficient is higher than traditional beta coefficient on explaining the return changes. Therefore, it can be said that the downside beta is superior to traditional beta in the ISE for chosen period.