Beta Instability When Interest Rate Levels Change

John S. Bildersee and Gordon Roberts

Journal of Financial and Quantitative Analysis, 1981, vol. 16, issue 3, 375-380

Abstract: Boquist, Racette, and Schlarbaum [3] and Livingston [6] show that a security systematic risk may be expressed as a function of its duration. These results have led to research examining the role of duration in explaining systematic risk, but Lanstein and Sharpe [5] indicate that Livingston's expression relies on the implicit assumption that extra-market covariances between securities are insignificant. Lanstein and Sharpe argue that such an assumption is unwarranted. They find a significant negative relationship between extra-market covariances and differences in duration between paired samples of common stock. Their paper suggests that duration may be associated with unsystematic risk and that any relation between duration and systematic risk is more complex than implied in [3] and [6].

Date: 1981
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