Beta parameter stability over bull and bear market on the WSE

Beta parameter is one of the commonly used coefficient to estimate the systematic risk associated with stocks. It plays a significant role in various aspects of decisions in the world of financial markets. Investors often use it in making their investment decisions. A lot of studies have been done in the field of beta parameter as well as many researchers have investigated the relationship between a systematic risk and stock market conditions during recent years of financial instability caused by the last financial crisis.

A main goal of this article is to examine the beta parameter stability over bull and bear market conditions on the Warsaw Stock Exchange (WSE). The paper presents an analysis of betas stability for over 100 stocks traded at the WSE. Beta is calculated using monthly rates of return during years 2005 – 2011, divided for bull and bear market. We would like to examine how much the betas differ between these two stock exchange market phases and are they stable from statistical point of view.