"The Relationship between Risk and Return is Conditional upon the Sign of the Excess Market ReturnThe SMP indicates a restrictive relation among three variables: ? Beta? Excess Market return? Expected return of portfolioThis relation accomplishes that it is an interface between beta and realized the excess marketreturn. It is mainlyregulatedpredictable excess portfolio return.Hence,noteworthyaffirmative relation amongst portfolio excess return and beta, accustomedupon both the indication and scale of market portfolio excess return.The equation of CAPM stated that in balance an individual security expected excess return is apositive.Optimal function of its relative amount of systematic, market based risk as measured by beta (ß ):i E(r )=ßi[E(r )]it Mt Wherer = R - R ? excess return on security i,it it ft r = R - R ?excess-return on the market portfolio, Mt it Mt R the return on security i, R the return on the market portfolio, it ? Mt= R ? the risk-free rate of return,ft t ?time E (*) ?the anticipationoperative.Whereß is the security beta i 2 and is equal to Covariance ?cov (R , R )/var (R ) = (? )(s ) (s )/(s ) , it Mt Mt i,M it Mt Mt 10 The Relationship between Risk and Return is Conditional upon the Sign of the Excess Market ReturnWhere( s ) ? the Standard deviation of return for security it , (s ) ? Standard deviation of return for the market portfolioMt 2 (s ) ? the variance of return for the market portfolio.Mt(? ) ?the correlation coefficient between the return for securityand the corresponding returni,M for the market portfolio, t?all at a time.It is probablethat excess returns of a market are positive .while;foreseeable excess market returnsare repeatedly negative. When realized market returns decrease below the risk free rate,acontrary relationship is forecast between realized returns and beta.The dual-beta CAPM market-model is stated as:r =a+b1D ß^it+b2(1 -D ) ß^it+ e r =a+b1D ß^ i t +b 2 1-D ß^ i t+eit t t it it t t it wherer ?the excess-return on portfolio it ß^it ? the estimated historical beta of portfolio-i; ?the dummy variable DtDt ? it can be expressed asD = 1 t ifr = 0, then D = 0 Mt t ifr < 0, where r = the excess-return on the market portfolio, Mt Mt t?all at time a, b , and b are fixed and E [e ] = 0. 1 2 it 11 The Relationship between Risk and Return is Conditional upon the Sign of the Excess Market ReturnThe Study concurrentlymakes anextremelynoteworthy, affirmative relation amongst beta andexcess portfolio returns, when excess market returns are affirmative,the counter relation amongbeta and excess portfolio returns, when excess market yield are negative. In this instance, the relation among beta and returns arrange for strong backing for anorderly butuncertain relation between beta and realized returns.Though,Fama and French (Fama, E.&French, K. (1992) this empirical study by trying thesuggestion that selections with lower levels of methodical, market-related risk The orderly relation amid beta and average realized portfolio returns which aregenerousindirectby the SLB market model. They are agreeing for the difference in beta that is distinct to size compresses the relationamongstordinary return and beta, to the fact where it is vague from no relation at all.The SLB market model is stated as:r = ai+ßi(r )+ e r =a i + ßi ( r )+ eit Mt it it Mt it whererit ?the excess-return on portfoliorMt ?the excess-return on the market portfolioßi ?the portfolio betaai ?a fixed term for a given portfolio eit? error term, E [eit] = 0t?all at time 12 "