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Time-Varying Beta Risk and Its Modeling Techniques for Turkish Industry Portfolios

Vasif Abi̇yev
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Vasif Abi̇yev: Aksaray Üniversitesi

Authors registered in the RePEc Author Service: Vasif Abiyev Abioglu ()

Iktisat Isletme ve Finans, 2015, vol. 30, issue 352, 79-108

Abstract: This paper aims to investigate time-varying beta risk for twenty Turkish industry portfolios. Using weekly data over the period 2002-2013, five different modeling techniques in addition to standard OLS model are employed. The general conclusion here clearly indicates that the systematic risk of each sector, which is summarized by the sector beta, is not stable over time. Based on the in-sample and out-of-sample forecasting results of alternative modeling techniques, the random walk process estimated by the Kalman filter is the most preferred in describing and forecasting the time-varying behavior of sector betas in Turkey. The study finds that, although forecasting performance of stochastic volatility model is higher than the EGARCH and the benchmark OLS model, it is inferior to the Kalman filter approach.

Keywords: Time-varying Beta Risk; Kalman Filter; Stochastic Volatility; EGARCH; Turkish Industry Portfolios (search for similar items in EconPapers)
JEL-codes: C19 G10 G11 (search for similar items in EconPapers)
Date: 2015
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