Recalcitrant betas: Intraday variation in the cross-sectional dispersion of systematic risk

TY - JOUR

T1 - Recalcitrant betas

T2 - Intraday variation in the cross-sectional dispersion of systematic risk

AU - Andersen, Torben G.

AU - Thyrsgaard, Martin

AU - Todorov, Viktor

N1 - Publisher Copyright: Copyright © 2021 The Authors.

PY - 2021/5

Y1 - 2021/5

N2 - We study the temporal behavior of the cross-sectional distribution of assets' market exposure, or betas, using a large panel of high-frequency returns. The asymptotic setup has the sampling frequency of returns increasing to infinity, while the time span of the data remains fixed, and the cross-sectional dimension of the panel is either fixed or increasing. We derive functional limit results for the cross-sectional distribution of betas evolving over time. We demonstrate, for constituents of the S&P 500 market index, that the dispersion in betas is elevated at the market open and gradually declines over the trading day. This intraday pattern varies significantly over time and reacts to information shocks such as clustered earning announcements and releases of macroeconomic news. We find that earnings news increase beta dispersion while FOMC announcements have the opposite effect on market betas.

AB - We study the temporal behavior of the cross-sectional distribution of assets' market exposure, or betas, using a large panel of high-frequency returns. The asymptotic setup has the sampling frequency of returns increasing to infinity, while the time span of the data remains fixed, and the cross-sectional dimension of the panel is either fixed or increasing. We derive functional limit results for the cross-sectional distribution of betas evolving over time. We demonstrate, for constituents of the S&P 500 market index, that the dispersion in betas is elevated at the market open and gradually declines over the trading day. This intraday pattern varies significantly over time and reacts to information shocks such as clustered earning announcements and releases of macroeconomic news. We find that earnings news increase beta dispersion while FOMC announcements have the opposite effect on market betas.

KW - Asset pricing

KW - C51

KW - C52

KW - cross-sectional dispersion

KW - functional convergence

KW - G12

KW - high-frequency data

KW - intraday variation

KW - market beta

KW - nonparametric inference

KW - systematic risk

UR - http://www.scopus.com/inward/record.url?scp=85105876708&partnerID=8YFLogxK

U2 - 10.3982/QE1570

DO - 10.3982/QE1570

M3 - Journal article

AN - SCOPUS:85105876708

SN - 1759-7323

VL - 12

SP - 647

EP - 682

JO - Quantitative Economics

JF - Quantitative Economics

IS - 2

ER -