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Previous studies have shown that stock returns bear a premium for downside risk versus upside potential. We develop a new risk measure which scales the traditional CAPM beta by the ratio of the upside beta to the downside beta, thereby incorporating the effects of both upside potential and downside risk. This “modified” beta has substantial explanatory power in standard asset pricing tests, outperforming existing measures, and it is robust to various alternative modeling and estimation techniques.

The authors consider a variety of cryptocurrency and equity risk factors as potential forces that drive cryptocurrency returns and carry risk premiums. In a cross-section of 2,000 biggest cryptocurrencies during 2014–2020, only downside market risk, cryptocurrency size and cryptocurrency policy uncertainty factors are systematically priced with significant premiums. Cryptocurrencies, which have greater exposures to these factors, yield higher returns subsequently. Equity market risk, particularly equity downside market risk, appears to be more important than cryptocurrency market risk, suggesting greater linkages between cryptocurrency and equity markets than we used to think. Global and the US equity factors are more relevant for the cryptocurrency market than local factors from other markets. However, there is no evidence that exposure to momentum, volatility and Fama–French factors is compensated by higher returns.

This paper categorizes and critiques the empirical research strategies that have been employed to test real options theory. Existing research has sought to detect valuable options in firms’ strategic investments as well as to investigate the payoffs from these investments. Our review highlights some of the evidence that has accumulated in recent years for real options theory. We flag some of the most important challenges and tradeoffs associated with the use of different empirical research approaches for testing real options theory in strategic management. The paper concludes by offering a number of research priorities to advance the theory by probing its descriptive validity as well as by addressing its normative aspirations to bridge corporate finance and strategy.

Purpose – This chapter reports on a rapidly growing trend in the analysis of data about emerging market (EM) economies – the use of baseline models as comparisons for explanatory models. Baseline models estimate expected values for the dependent variable in the absence of a hypothesized causal effect but set higher standards than do traditional null hypotheses tests that expect no effect.

Design/methodology/approach – Although the use of baseline models research originated in the 1960s, it has not been widely discussed, or even acknowledged, in the EM literature. We surveyed published EM studies to determine trends in the use of baseline models.

Findings – We categorize and describe the different types of baseline models that scholars have used in EM studies, and draw inferences about the differences between more effective and less effective uses of baseline models.

Value – We believe that comparisons with baseline models offer distinct methodological advantages for the iterative development of better explanatory models and a deeper understanding of empirical phenomena.

In this paper we investigate the empirical performance of an alternative beta risk estimator, which is designed to be superior to its conventional counterparts in situations of extreme thin trading. The estimator used is based on the sample selectivity model. The study compares the resultant selectivity-corrected beta to the OLS beta and Dimson Betas. We demonstrate the empirical behaviour of the selectivity corrected beta estimator using a sample of stocks in seven countries from Latin America. The results indicate that the selectivity-corrected beta does correct the downward bias of the OLS estimates and is likely to better estimate stock risk.

This chapter tests the market risk and economic policy uncertainty (EPU) of five Asian stock market returns and finds positive and significant intertemporal relations between excess stock returns and conditional volatility/downside risk. The results support positive risk-return relations across five Asian markets after controlling for the lagged dividend yield and the change in EPU ( Δ EPU). The evidence strongly indicates that excess stock returns are negatively correlated with the Δ EPUs. This finding holds true not only for the domestic market but also for external sources. The negative effect of Δ EPU is more profound from the US and global markets as compared with those from the Europe, Japanese, and domestic markets and suggests that a pathway to forming an optimal strategy for portfolio risk management depends on developing an effective hedging strategy against the impact of Δ EPUs from US/global markets.

A firm's resources and capabilities can form the basis for performance differences among firms. The question is “how do firms face the challenge of acquiring resources and developing capabilities during their day-to-day activities in order to face competition?” Case study research involving day-to-day activities of a project-firm in a B2B context suggests that social capital – the sum of structural, relational and cognitive resources – built in networks increases the ability to face the challenge of resource acquisition and capability development even during daily activities. A communication network study clearly maps this influence of social capital. More precisely, dominant or powerful employees should be avoided. Next to organizational structures characterized by hierarchy, high and low communications are also not desirable. Moreover, too much trust can harm firms’ abilities to develop capabilities when performing day-to-day activities. Even a complete shared vision hinders firms’ capability development during their day-to-day activities. This study supports the negative impact of overembeddedness; shows the value of articles discussing the downside of social capital and confirms the paradox of embeddedness: overembeddedness as well as underembeddedness has negative implications for a firm's performance. Moreover, from the research results important managerial lessons can be deducted, such as (1) the basis for performance differences can be formed during day-to-day activities and (2) social capital management is a critical success factor in outperforming competitors. Therefore, managers should be aware of the potential value embedded in their day-to-day activities and relationships based on economic transactions. They can leverage their day-to-day activities and relationships based on economic transactions and consider them as sources for resources and capabilities that can be deployed in their search for a competitive position. Moreover, managers should not only pay attention to their financial and human capital but also to the social capital built in the firm's networks and in their employees’ networks. Social capital can influence – among others – divisional learning and divisional capability development.

We examine the incremental cross-sectional role of several common risk factors related to size, book-to-market, and momentum in size-and-momentum-sorted portfolios. Unlike the existing literature, which focuses on the conditional mean specification only, we evaluate the common risk factors’ incremental explanatory power in the cross-sectional characterization of both average return and conditional volatility. We also investigate the role of ex-ante market risk in the cross-section. The empirical results demonstrate that the size-and-momentum-based risk factors explain a significant portion of the cross-sectional average returns and cross-sectional conditional volatility of the benchmark equity portfolios. We find that the Fama–French (1993) factors and the ex-ante market risk are priced in the cross-sectional conditional volatility. We conclude that the size-and-momentum-based factors provide a source of risk that is independent of the Fama–French factors as well as ex-post and ex-ante market risk. Our results bolster the risk-based explanation of the size and momentum effects.