The significance of beta for stock returns in Australian markets

We report that betas of portfolios of Australian stocks possess a high level of stability, implying that beta is a meaningful measure of a portfolio's market risk exposure. Further, by allowing broad demarcations of company size and liquidities, we show that beta appears not to be rewarded continuously, but discretely, across thresholds of company size and stock liquidity. We conclude that beta remains relevant in the description of the risk-reward structure of asset pricing in Australian markets.