Time varying CAPM betas and banking sector risk

Tony Caporale

Economics Letters, 2012, vol. 115, issue 2, 293-295

Abstract: This paper employs the Bai and Perron (1998, 2003) structural break methodology to investigate whether the CAPM betas for banking sector stocks are time invariant. I find evidence for three large structural shifts in my monthly (1941.02–2008.01) sample. The third break corresponds with a decline in the perceived riskiness of banking stocks in the period starting in 2000.04. The banking sector was thus priced to be less risky during the period associated with rising leverage and financial sector risk.

Keywords: CAPM; Financial risk; Structural breaks (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:115:y:2012:i:2:p:293-295

DOI: 10.1016/j.econlet.2011.12.056

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