The beta heuristic from a time/frequency perspective: A wavelet analysis of the market risk of sectors
Bruce D. McNevin and
Economic Modelling, 2018, vol. 68, issue C, 570-585
Wavelet methodology is used to estimate scale betas for eleven industry/sectors for the period 1986-2016. A comparison of scale betas with standard regression estimates of betas finds no significant differences for any of the sectors at high frequency/low scales. However, for most of the sectors there are significant differences at medium and high scales. A rolling 60 month window shows that scale betas may differ from standard betas substantially for several years. Implications for portfolio managers, especially those employing beta rotation strategies, are provided.
Keywords: Wavelet analysis; CAPM; Equity betas; Sectors (search for similar items in EconPapers)
JEL-codes: C1 G1 G10 G13 C13 C32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:68:y:2018:i:c:p:570-585
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