Beta Risk and Regime Shift in Market Volatility

Roland Shami and Don (Tissa) U. A. Galagedera
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Roland Shami: Monash University

Finance from EconWPA

Abstract: In this paper, we relate the returns in the thirty securities in the Dow Jones index to regime shifts in stock market volatility. We apply a Markov switching process of order one to market volatility and examine the variation in the securities' returns in different volatility regimes. We test the significance of the risk premium in different market regimes and we find evidence of relationship between market volatility and securities beta risk.

Keywords: Markov regime-switching; market volatility; beta risk (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-fin and nep-rmg
Date: 2004-06-23
Note: Type of Document - pdf; pages: 19
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http://129.3.20.41/eps/fin/papers/0406/0406012.pdf (application/pdf)

Related works:
Working Paper: Beta Risk and Regime Shift in Market Volatility (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0406012

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