Macroeconomic determinants of stock market betas

Mariano Gonzalez Sanchez, Juan Nave and Gonzalo Rubio

Journal of Empirical Finance, 2018, vol. 45, issue C, 26-44

Abstract: This paper proposes the mixed frequency conditional beta. We employ the MIDAS framework to estimate market betas as a weighted average of a high and low frequency components. Then, we analyze the macroeconomic determinants of stock market betas and the counter- or pro-cyclicality of betas across well-known portfolio sorts. The surplus consumption ratio with time-varying risk aversion and the default premium are the aggregate variables with the higher statistical impact on stock market betas across alternative portfolios. We show the implications of the mixed frequency betas for the term structure of holding-period expected excess returns, and for alternative investment strategies.

Keywords: Stock market betas; Mixed data sampling (MIDAS); Low-frequency component; High-frequency component; Macroeconomic indicators (search for similar items in EconPapers)
JEL-codes: C22 E32 E44 G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:45:y:2018:i:c:p:26-44

DOI: 10.1016/j.jempfin.2017.10.003

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