Time Varying Beta Risk: An Analysis of Alternative Modelling Techniques
Robert Faff,
David Hillier and
Joseph Hillier
Journal of Business Finance & Accounting, 2000, vol. 27, issue 5‐6, 523-554
Abstract:
This paper investigates the performance of three different approaches to modelling time‐variation in conditional asset betas: GARCH models, the extended market model of Schwert and Seguin (1990) and the Kalman Filter algorithm. Using daily UK industry returns, we find the simple market model beta to be as efficient as the more complicated GARCH type models. However, the Kalman Filter algorithm incorporating a random walk parameterisation dominates all other models under the mean‐square error criterion. Finally, we provide strong evidence that a combination of the methods under investigation may lead to considerably more powerful estimators of the time‐variation in conditional beta.
Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (66)
Downloads: (external link)
https://doi.org/10.1111/1468-5957.00324
Related works:
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:bla:jbfnac:v:27:y:2000:i:5-6:p:523-554
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X
Access Statistics for this article
Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker
More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().