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2017 | OriginalPaper | Chapter

1. Baryonic Beta Dynamics: The Econophysics of Systematic Risk

Author: James Ming Chen

Published in: Econophysics and Capital Asset Pricing

Publisher: Springer International Publishing

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Abstract

The conventional capital asset pricing model remains the dominant paradigm among financial practitioners, if not among scholars of finance. The preferred academic approach—Fama and French’s three-factor model—assigns greater weight to book-to-market ratios and firm size as factors affecting the cross-section of stock returns. In order to rehabilitate the CAPM and its near cousin, the efficient market hypothesis, this book proposes to bifurcate beta (the CAPM’s basic measure of systematic risk) along three vectors: either side of mean returns, relative volatility versus correlation, and cash-flow versus discount-rate effects. These three divisions in beta correspond to the three generations of quarks and leptons in the Standard Model of particle physics.
Metadata
Title
Baryonic Beta Dynamics: The Econophysics of Systematic Risk
Author
James Ming Chen
Copyright Year
2017
DOI
https://doi.org/10.1007/978-3-319-63465-4_1

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