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Beta, Uncertainty, Bullish Market, Bearish Market
The studies on beta variability have been fully documented in the literature with various empirical stances, meaning that a concession has not been reached. In view of this we employ the variable Mean Response Regression Model to investigate the random movement of beta coefficients over time and across market phases, using monthly stock returns from Nigerian Stock Exchange (NSE). Our findings based on this model show that beta coefficients move randomly around a trend line when the market is up-beat, whereas they tend to be less volatile in the down market. However, a long-run equilibrium relationship between the return on the individual security and beta components is evident in the two markets. Based on these findings we recommend that investors should arbitrage between these markets and take advantage of price differentials to earn riskless profit.