The Relationships Between Beta Coefficients in the Classical and Downside Framework: Evidence from Warsaw Stock Exchange

This paper presents the relationship between classical and downside beta coefficients in the context of data generating processes. The theoretical analysis were the basis for determining the relationship between the beta coefficients in the classical and downside framework. Empirical studies based on regression analysis and correlation of the time series of daily returns sectoral indices quoted on the Warsaw Stock Exchange. Our results suggest that the relationships between classical and downside systematic risk measures depend on the basic parameters of the distribution of returns of market portfolio approximation. There are statistically significant correlations between the standard deviation, asymmetry and kurtosis of market portfolio and measures expressing the relation of beta coefficients. The arguments may be an indication of choosing a systematic risk measures and evaluation of the real beta coefficients. This choice is determined by the data generating process, which may contribute to differences between results of CAPM tests.