Capital asset pricing in the classical and downside approaches to risk

The purpose of the paper is to verify the functioning of the Capital Asset Pricing Model (CAPM) on the Polish capital market both in the classical and downside approaches to risk. The subject of the study are time series of returns of 14 sectoral sub-indices listed on the Warsaw Stock Exchange in 2011–2018. The use of risk measures in the conventional and downside approaches constitutesan important contribution to the studies on the risk of capital investments. The presented research method, which involves conditional regressions determined by the market situation, was adopted as a response to ambiguous results of unconditional CAPM relations in the previous research on capital markets.The results of the performed analyses indicate that the significance of risk assessment (risk premium) depends on the sign of the market excess returnto the largest extent. They also evidence the supremacy of conditional relations over the unconditional ones. The ana-lysis of unconditional relations has moreover demonstrated that downside risk factors, unlikethe majority of classical measures, influence the process of shaping the returns of sub-indicessignificantly. In the Polish capital market, it is only co-kurtosis, among other co-moments, which is subject to significant pricing during periods of market growth.