The Conditional Beta Risk-Return in the Pricing Models of Individual Stocks

This paper finds a significant conditional risk-return relationship even in individual stocks when dual betas based on market conditions are considered in the traditional asset pricing model. The conditional risk-return relationship appears to persist even after adjusting for firm size, total risk, and industry, surpassing the explanatory power of firm size, which has traditionally been identified as a significant variable for returns. Interestingly, this study discovers the so-called November effect instead of the traditional January effect, and in November, beta risk appears to be rewarded in both bull and bear markets regardless of market conditions.