Persistence in the Realized Betas: Some Evidence from the Stock Market

Guglielmo Maria Caporale, Luis Gil-Alana and Miguel Martin-Valmayor ()
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Miguel Martin-Valmayor: Facultad de Ciencias Económicas y Empresariales, Universidad Complutense de Madrid, 28040 Madrid, Spain

JRFM, 2024, vol. 17, issue 4, 1-28

Abstract: This paper examines the stochastic behaviour of the realized betas in the CAPM model for the ten largest companies in terms of market capitalisation included in the U.S. Dow Jones stock market index. Fractional integration methods are applied to estimate their degree of persistence at daily, weekly, and monthly frequencies over the period July 2000–July 2020 over time spans of 1, 3, and 5 years. On the whole, the results indicate that the realized betas are highly persistent and do not exhibit weak mean-reverting behaviour at the weekly and daily frequencies, whilst there is some evidence of weak mean reversion at the monthly frequency. Our findings confirm the sensitivity of beta calculations to the choice of frequency and time span (the number of observations).

Keywords: realized beta; CAPM; persistence; mean reversion; long memory (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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