Realized semibetas and international stock return predictability

We decompose traditional betas into semibetas based on the signed covariation between the returns of individual stocks in an international market and the returns of three risk factors: local, global, and foreign exchange. Using high-frequency data, we empirically assess stock return comovements with these three risk factors and find novel relationships between these factors and future returns. Our analysis shows that only semibetas derived from negative risk factor and stock return downturns command significant risk premia. Global downside risk is negatively priced in the international market and local downside risk is positively priced.

Automated summary

This paper decomposes traditional betas into semibetas based on the signed covariation between individual stock returns in an international market and the returns of three risk factors: local, global, and foreign exchange. Using high-frequency data, the authors empirically assess the comovement of stock returns with these three risk factors and find novel relationships between them and future returns. The analysis demonstrates that only semibetas derived from negative risk factors and stock return downturns command significant risk premia. Global downside risk is negatively priced in the international market, while local downside risk is positively priced.