Accounting-based CAPM: Symmetrical and downside risk approaches
Accounting-based CAPM: Symmetrical and downside risk approaches

Summary/Abstract: The complexity of asset return variability justifies supplementing the standard CAPM formula with market risk measures based on firms’ fundamental analysis. Moreover, a key area of investigation is the approach to downside pricing. The main objective of this study is to test non-standard CAPM extensions that incorporate accounting information. The results for the Frankfurt Stock Exchange indicate that profitability ratios constitute a significant source of systematic risk and generate a positive premium related to a company’s financial condition. Furthermore, in the case of large firms, sensitivity measures based on downside accounting betas demonstrate a clear advantage over their conventional counterparts.

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