Time-varying beta in functional factor models: Evidence from China

Lajos Horvath, Bo Li, Hemei Li and Zhenya Liu

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: In this paper, we introduce a functional method to investigate how betas change over time in factor models. Based on the China A-share data, we drop the constant beta assumption in the CAPM and multi-factor models to estimate the time-varying betas directly from the functional data regression. The empirical results show that exposures to all risk factors have certain time-varying patterns in the Chinese A-share stock market.

Keywords: Functional factor models; Time-varying beta; Functional regression; Risk factors; Basic functions (search for similar items in EconPapers)
JEL-codes: C31 C32 C51 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940820301753

DOI: 10.1016/j.najef.2020.101283

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