Dynamic Conditional Beta is Alive and Well in the Cross-Section of Daily Stock Returns

Turan G. Bali (), Robert Engle and Yi Tang ()
Additional contact information
Turan G. Bali: McDonough School of Business, Georgetown University
Yi Tang: Schools of Business, Fordham University

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: This paper investigates the significance of dynamic conditional beta in predicting the cross-sectional variation in expected stock returns. The results indicate that the time-varying conditional beta is alive and well in the cross-section of daily stock returns. Portfolio-level analyses and firm-level cross-sectional regressions indicate a positive and significant relation between dynamic conditional beta and future returns on individual stocks. An investment strategy that goes long stocks in the highest conditional beta decile and shorts stocks in the lowest conditional beta decile produces average returns and alphas of 8% per annum. These results are robust to controls for size, book-tomarket, momentum, short-term reversal, liquidity, co-skewness, idiosyncratic volatility, and preference for lottery-like assets.

Keywords: Dynamic conditional beta; conditional CAPM; ICAPM; and expected stock returns. (search for similar items in EconPapers)
JEL-codes: C13 G10 G11 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2013-02
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1305.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1305.pdf [301 Moved Permanently]--> https://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1305.pdf)

Related works:
Journal Article: Dynamic Conditional Beta Is Alive and Well in the Cross Section of Daily Stock Returns (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1305

Access Statistics for this paper

More papers in Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sumru Oz ().