We incorporate up versus down markets in time series regressions, and we compare the predictive power in cross-sectional asset returns of the CAPM beta, beta from up markets, beta from down markets, and two modified betas based on scaling the CAPM beta by the up/down betas. The CAPM beta scaled...

There exist many anomalous relationships between firm characteristics and average asset returns which are inconsistent with the predictions of the Capital Asset Pricing Model (CAPM). The size and value effects are two such well known empirical anomalies (see Fama and French, 1992, 1993). The...