Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing

Publikation: Working paperForskning

Dokumenter

  • rp17_34

    Forlagets udgivne version, 1,39 MB, PDF-dokument

  • Hossein Asgharian, Lund University, Sverige
  • Charlotte Christiansen
  • Ai Jun Hou, Stockholm Business School, Stockholm University, Sverige
  • Weining Wang, City University of London, Storbritannien
We suggest a bivariate component GARCH model that simultaneously obtains factor betas’ long- and short-run components. We apply this new model to industry portfolios using market, small-minus-big, and high-minus-low portfolios as risk factors and find that the cross-sectional average and dispersion of the betas’ short-run component increase in bad states of the economy. Our analysis of the risk premium highlights the importance of decomposing risk across horizons: The risk premium associated with the short-run market beta is significantly positive. This is robust to the portfolio-set choice.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider43
StatusUdgivet - 9 okt. 2017
SerietitelCREATES Research Papers
Nummer2017-34

    Forskningsområder

  • long-run betas, short-run betas, risk premia, component GARCH model, MIDAS

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