Department of Economics and Business Economics

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

Research output: Working paperResearch

Standard

Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. / Asgharian, Hossein; Christiansen, Charlotte; Hou, Ai Jun; Wang, Weining.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2017.

Research output: Working paperResearch

Harvard

Asgharian, H, Christiansen, C, Hou, AJ & Wang, W 2017 'Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing' Institut for Økonomi, Aarhus Universitet, Aarhus.

APA

Asgharian, H., Christiansen, C., Hou, A. J., & Wang, W. (2017). Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. Aarhus: Institut for Økonomi, Aarhus Universitet. CREATES Research Papers, No. 2017-34

CBE

Asgharian H, Christiansen C, Hou AJ, Wang W. 2017. Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. Aarhus: Institut for Økonomi, Aarhus Universitet.

MLA

Asgharian, Hossein et al. Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. Aarhus: Institut for Økonomi, Aarhus Universitet. (CREATES Research Papers; Journal number 2017-34). 2017., 43 p.

Vancouver

Asgharian H, Christiansen C, Hou AJ, Wang W. Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. Aarhus: Institut for Økonomi, Aarhus Universitet. 2017 Oct 9.

Author

Asgharian, Hossein ; Christiansen, Charlotte ; Hou, Ai Jun ; Wang, Weining. / Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing. Aarhus : Institut for Økonomi, Aarhus Universitet, 2017. (CREATES Research Papers; No. 2017-34).

Bibtex

@techreport{49c21224a1594054859c2d17fdc1838c,
title = "Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing",
abstract = "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.",
keywords = "long-run betas, short-run betas, risk premia, component GARCH model, MIDAS",
author = "Hossein Asgharian and Charlotte Christiansen and Hou, {Ai Jun} and Weining Wang",
year = "2017",
month = "10",
day = "9",
language = "English",
series = "CREATES Research Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2017-34",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - Long- and Short-Run Components of Factor Betas: Implications for Equity Pricing

AU - Asgharian, Hossein

AU - Christiansen, Charlotte

AU - Hou, Ai Jun

AU - Wang, Weining

PY - 2017/10/9

Y1 - 2017/10/9

N2 - 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.

AB - 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.

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

M3 - Working paper

T3 - CREATES Research Papers

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

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -