| Abstract: | I apply a multivariate one‐step testing procedure to investigate a dual‐beta CAPM. I begin by establishing that there is no statistical relation between beta and returns for the standard CAPM. I then re‐cast the one‐step test to accommodate a dual‐beta CAPM under bull and bear market conditions. When the excess market return is negative (positive), I find strong evidence of a negative (positive) relation between beta and returns. The strength of my results suggests that the success of the model is not crucially dependent on the argument for beta instability. |
